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2720Using the 2013-2017 NEEQ innovation layer listed companies and GEM listed companies as the research sample, this paper empirically tests the impact of market liquidity on innovation investment on different capital markets and its mechanism. We find that stock liquidity of NEEQ is positively related to enterprise innovation investment, while liquidity of GEM is negatively related to innovation investment. From the perspective of institutional investors’ supervision, we test the intermediary role of institutional investors in the relationship between liquidity and innovation investment, and find that the increase of liquidity in GEM can attract more institutional investors to hold shares. This increase of shareholding ratio can promote enterprise innovation investment. On the other hand, the improvement of liquidity in NEEQ will also lift the shareholding ratio, whereas this increase of shareholding ratio may inhibit enterprise innovation investment. Further to divide institutional investors into independent and non-independent, it is found that independent institutional investors play a facilitating role in GEM, while non-independent investors in NEEQ inhibit enterprise innovation investment. For the first time, this paper demonstrates the non-linear role of liquidity in influencing enterprise innovation by using China’s special multi-level capital market. Compared with the mature capital market in the US, China’s capital market is still in the development stage. This paper differs from previous studies by focusing on two markets with widely differing levels of development—NEEQ and GEM. Our findings suggest that the role of liquidity in influencing enterprise innovation varies depending on the level of development of the capital market in which the enterprise is listed. This finding is helpful to dialectically understand the heterogeneity of the impact of capital market liquidity on enterprise innovation investment. Second, this paper examines the mechanism of liquidity influencing enterprise innovation from the perspective of institutional investor supervision, and reveals the different roles played by institutional investors on different markets with huge liquidity differences. Third, the findings of this paper provide practical evidence for the regulators of emerging capital markets to adjust the impact of market liquidity on enterprise innovation through institutional arrangements. On the more liquid GEM, one way to promote enterprise innovation without reducing liquidity is to encourage independent institutions to participate. In NEEQ, where liquidity is too low, market liquidity needs to be continuously increased to promote innovation, while at the same time being vigilant against the inhibiting effect of non-independent institutional investors.
/ Journals / Foreign Economics & Management
Foreign Economics & Management
LiZengquan, Editor-in-Chief
ZhengChunrong, Vice Executive Editor-in-Chief
YinHuifang HeXiaogang LiuJianguo, Vice Editor-in-Chief
Killing or Pushing: The Effect of Stock Liquidity on Innovation Investment of SME—A Comparative Study between NEEQ and GEM
Foreign Economics & Management Vol. 43, Issue 06, pp. 105 - 119 (2021) DOI:10.16538/j.cnki.fem.20201116.401
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Cite this article
Xue Haiyan, Zhang Xindong. Killing or Pushing: The Effect of Stock Liquidity on Innovation Investment of SME—A Comparative Study between NEEQ and GEM[J]. Foreign Economics & Management, 2021, 43(6): 105-119.
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