Innovation Competition, Payouts and Cash Holdings

52 Pages Posted: 6 Dec 2018

See all articles by Diana Shao

Diana Shao

Oregon State University - College of Business

Date Written: November 16, 2018

Abstract

This study investigates how competition in the innovation space affects the likelihood of dividend payment and the level of cash holdings. I construct annual firm innovation descriptions from patent filings’ textual content, and develop a new measure, innovation competition, using all firms’ annual innovation descriptions to evaluate the exogenous changes in the entire innovation space faced by each firm. As innovation competition increases by one standard deviation, the likelihood of dividend payment rises by 0.98 percentage points and cash holdings increases by 1.10 percentage points. Innovation competitions are robust to product market fluidity.

Keywords: patent, textual analysis, innovation, dividend, payout policy, cash holdings

Suggested Citation

Shao, Diana, Innovation Competition, Payouts and Cash Holdings (November 16, 2018). Available at SSRN: https://ssrn.com/abstract=3292518 or http://dx.doi.org/10.2139/ssrn.3292518

Diana Shao (Contact Author)

Oregon State University - College of Business ( email )

Corvallis, OR 97331
United States

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