Measurement and determinants of innovation efficiency and its impact on asset prices – empirical evidence from listed companies in China

This study adopts a dynamic slack-based DEA framework to estimate the innovation efficiency of the exchange-listed companies that are at the centre of China’s innovation network. On average, these companies have low efficiency scores, signalling an over-investment in fixed assets, R&D, and excessive subsidies received from the government, along with a shortage of patent output. A Tobit-based analysis indicates that market share of sales, overvaluation, and profitability are positively linked to innovation efficiency, while excess analyst coverage can impede corporate innovation. Moreover, innovation efficiency is positively associated with stock returns from both cross-sectional regression tests and portfolio strategies. Copyright © 2023 Inderscience Enterprises Ltd.