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Hedge Funds and Corporate Innovation
Author(s) -
Wang Ying,
Zhao Jing
Publication year - 2015
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12059
Subject(s) - alternative beta , hedge fund , endogeneity , business , open end fund , fund of funds , hedge accounting , value (mathematics) , finance , institutional investor , economics , corporate governance , market liquidity , econometrics , machine learning , computer science
Using National Bureau of Economics Research patent data and hedge fund holdings in US firms from 1998 to 2006, we examine the effect of hedge fund ownership on corporate innovation. We find that hedge fund ownership increases both patent quantity and quality, even after controlling for endogeneity. Hedge funds appear to increase innovation and firm value by increasing research and development (R&D) productivity and innovation efficiency rather than R&D input. Our study suggests another channel through which hedge funds may enhance firm value, contributing to the literature on hedge fund ownership.