We examine the effect of debt financing capacity on firm innovation by employing a shock that increases firms' asset pledgeability. We find that firms increase innovation activities after the shock, and the increase is greater in regions with more effective enforcement and in firms with more...

Purpose - We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns. Design/methodology/approach - We estimate a cross-sectional model of expected entropy that uses several common risk factors to predict idiosyncratic entropy....