The Real Effects of Financial Markets on Scientific Disclosure: Evidence From a Quasi-Natural Experiment

60 Pages Posted: 21 Jan 2021

See all articles by Stefano Baruffaldi

Stefano Baruffaldi

University of Bath; Max Planck Institute for Innovation and Competition

Markus Simeth

Copenhagen Business School - Department of Strategy and Innovation

David Wehrheim

IESE Business School

Date Written: December 15, 2020

Abstract

While innovation disclosure is essential for cumulative knowledge production and economic growth, evidence on firm incentives to disclose innovation outcomes is lacking. We examine the role of financial markets in firms’ decisions to disseminate scientific research results. We employ a quasi-natural experiment that exploits plausibly exogenous variation in analyst coverage, resulting in higher information asymmetries. We find that firms respond by a quick and enduring increase in scientific publications. We also show that disclosure decisions are shaped by financial constraints and managerial incentives. We discuss important implications, such as potential crowding effects between transparency initiatives and socially desirable innovation disclosure.

Keywords: information asymmetries, innovation disclosure, corporate science, financial analysts, signaling, innovation, R&D

JEL Classification: O32, O34, G30

Suggested Citation

Baruffaldi, Stefano and Simeth, Markus and Wehrheim, David, The Real Effects of Financial Markets on Scientific Disclosure: Evidence From a Quasi-Natural Experiment (December 15, 2020). Available at SSRN: https://ssrn.com/abstract=3749418 or http://dx.doi.org/10.2139/ssrn.3749418

Stefano Baruffaldi

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

Markus Simeth (Contact Author)

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

David Wehrheim

IESE Business School ( email )

Camino Cerro del Águila, 3
Madrid, Madrid 28023
Spain

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