Does information quality matter in corporate innovation? Evidence from the Korean market

Abstract

Using extensive manually collected data on granted patents, this study examines the effects of the degree of a firm's information asymmetry on corporate innovation in the Korean market, which is characterized by weak transparency and active firm innovation. Based on four measures of information asymmetry, we find that the quality of information about a firm has a positive influence on its innovation activities. In addition, this influence is more evident in firms with poor corporate governance practices and in Chaebol-affiliated firms. Overall, this study offers insights on the importance of information quality for firms planning investments in innovation, which is a long-term and highly uncertain commitment. An important policy implication is that regulatory authorities should promote the timely and reliable disclosure of information on firms.