The perception of corporate innovation and credit spreads in emerging markets: evidence from China.

This article is an examination of how investors in the corporate bond market in emerging economies react to patents. To empirically explore this question, we constructed a sample of 1862 Chinese corporate bonds issued between 2004 and 2020 and gathered data on Chinese domestic patents, reverse innovation patents, and the validity of patents. The empirical results suggest that domestic patents are the primary source of information for bond investors in China when evaluating corporate innovation and that investors can successfully discern between patents that are valid and those that are not. At the same time, the positive relationship between corporate innovation and bond prices is found to be negatively moderated by credit ratings and state ownership. [ABSTRACT FROM AUTHOR]