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Innovation and Firm Performance: Evidence from the Capital Market

Journal of Modern Accounting and Auditing, 9(2), 272-277, February 2013

7 Pages Posted: 30 May 2012 Last revised: 14 Jul 2013

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: May 30, 2012

Abstract

This paper examines the role of innovation in firm performance by drawing empirical evidence from the capital market. The current study analyzes risk premiums and risk-adjusted excess returns of a portfolio of the most innovative firms in the United States from 2006 to 2010. The results show that average risk premiums of an equal-weighted portfolio of the most innovative firms in the United States are economically larger than the CRSP value-weighted index risk premiums 4 years in a row from 2006 to 2009 and are economically greater than the S&P 500 index risk premiums from 2006 to 2010. The portfolio exhibits average statistically significant positive risk-adjusted excess returns for the 3-year and 5-year holding period intervals. The findings serve as evidence of the favorable role of innovation in firm performance.

Keywords: risk premiums, risk adjusted excess returns, innovation

JEL Classification: G11, G12, G14

Suggested Citation

Sum, Vichet, Innovation and Firm Performance: Evidence from the Capital Market (May 30, 2012). Journal of Modern Accounting and Auditing, 9(2), 272-277, February 2013. Available at SSRN: https://ssrn.com/abstract=2070515 or http://dx.doi.org/10.2139/ssrn.2070515

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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