Hedge fund ownership and the innovation of high-tech firms: Evidence from the Science and technology innovation board in China

High-tech firms stand apart from traditional firms due to their emphasis on innovation. This paper provides empirical evidence indicating new mechanisms through which hedge fund holdings enhances innovation of hightech firms listed on the Science and Technology Innovation Board in China. Different from that of traditional firms, this paper finds that hedge fund ownership enhances innovation output by increasing innovation input and improving innovation efficiency of high-tech firms in China. The positive relationship is especially evident among firms with long-term holdings by hedge funds, low agency costs, a high degree of equity checks and balances, and those that are privately held enterprises.