The scientific value of finance after the crisis: Evidence from research usage and financial innovation

Abstract

Understanding how users of research cope with episodes that potentially diminish trust in accepted knowledge such as the 2007-2009 financial crisis is important for financial economics. Utilizing citations in practitioner-oriented journals I investigate post-crisis changes in authors’ knowledge sources and compare the inert behaviors of academics and practitioners towards science. Rather than abandonment of finance research in the practitioner literature, the evidence shows increased interdisciplinarity. Unpublished, non-scholarly sources become markedly less popular. Engaging in finance scholarship is causally and positively related to leading institutions’ patenting activities, suggesting having a scholarly culture aids firms’ product market recovery after the crisis.

Keywords: financial crisis, scientific knowledge, paradigm shift, practitioner journals

JEL Classification: A11, G20, O30