This paper examines the effects of asset liquidity on innovation investments. We show that firms with high liquid assets tend to invest more in research and development (R&D) and generate a higher number of patents and patent citations, even after controlling for cash holdings, stock liquidity...

This paper investigates the effects of aggregate stock market liquidity on innovation at both aggregate and firm levels for publicly traded firms in the U.S. I show that both effects are significantly positive. Next, I provide two underlying mechanisms through which aggregate stock liquidity...