TITLE:
Option Trading, Information Asymmetry and Firm Innovativeness: Evidence from Stock Options Trading Firms from India
AUTHORS:
Himanshu Joshi
KEYWORDS:
Stock Options, Firm Innovativeness, Information Asymmetry, Logit Regression
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.11,
August
7,
2018
ABSTRACT: Present study examines the effect of option listing
and subsequent trading on the innovation in the context of publicly listed
Indian firms. Innovation is defined in terms of input and output as R & D
expense to sales, and number of patents filed by firm, respectively. Multiple
regression analysis is conducted to identify drivers of innovations. Measures
of innovation are used as dependent variables, while dummy for option trading
is taken as independent variable along with other firm level control variables.
The study also examines the determinants of the option listing on individual
stocks using binary-logistic regression. Firm age, financial leverage, dividend
payout, and profitability affect internal R & D allocations for the sample
firms. As far as firm’s research output is concerned, firm leverage,
institutional holding, option trading, and ESOP are the major determinants.
Firm leverage adversely affects R & D input and R & D output alike.
Dividend paying, large firms having higher institutional holdings are likely to
attract stock option listing, while firms with high firm specific return variations
are likely to have very low probability of option listing.