SEMINAR SERIES No. 08/1415
The Bright Side of Cash Holdings: Innovation Efficiency
Prof. K.C. John Wei
Department of Finance
Hong Kong University of Science & Technology
Using U.S. data from 1976-2006, we find that large cash reserves lead to greater innovation success. More specifically, firms with higher cash-to-assets ratios obtain more patents and patent citations for given amounts of research and development expenditures. Using the shift in technology cumulativeness to identify exogenous stimulation of innovation, difference-in-differences estimations support the causal impact of cash on innovation performance. Further analysis reveals that the effect of cash holdings on innovation is stronger for firms with tighter financial constraints, lower institutional ownership, or lower managerial compensation incentives. Finally, cash holdings push innovation towards the direction of breakthrough innovation.
Date: November 18, 2014 (Tuesday)
Venue: Faculty of Business Administration, E22-1008
A Short Biography of Prof. K.C. John Wei
Prof. K. C. John Wei serves as Chair Professor, Department of Finance of Hong Kong University of Science and Technology. Prof. Wei got his Beng in Industrial Management at National Taiwan Institute of Technology and MBA at National Chengchi University, Taiwan. He then got his PhD in Finance at University of Illinois at Urbana-Champaign, USA. He is also the Director of MSc in Financial Analysis/ Investment Management Programs, Director of Hainan Center and Associate Director of Value Partners Center for Investing at HKUST. In addition, he is the Independent Director of Haitong International Securities Group Limited, HK.