Title

Innovate or die: Corporate innovation and bankruptcy forecasts

Publication Date

12-1-2020

Document Type

Article

Department

Marketing and Business Analytics

Publication Title

Journal of Empirical Finance

Volume

59

DOI

10.1016/j.jempfin.2020.09.002

First Page

88

Last Page

108

Abstract

We investigate the relationship between a firm's innovation performance and its probability of bankruptcy. Estimating the discrete hazard model with a comprehensive set of bankruptcies spanning the period of 1980–2009, we find several previously neglected innovation-based variables are important determinants of bankruptcy probability, especially for firms belonging to technology-intensive industries. R&D productivity demonstrates persistent significance across different prediction horizons while the predictive power of patent count becomes larger and more significant at longer prediction horizons. We also find that a firm's organization capital intensity correlates positively with future bankruptcy.

Keywords

Corporate bankruptcy, Discrete hazard model, Innovation, Patent

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