R&D capital increases firms’ ability to identify, absorb, and utilize new external information. Firms with absorptive capacity become resilient to external shocks while providing an opportunity to protect shareholder wealth during a crisis period. This study examines the role of firms’ absorptive capacity in protecting shareholder wealth around the COVID-19-induced stock market crisis. Our findings report that firms’ absorptive capacity is positively related to stock returns of US firms during the COVID-19 pandemic. This positive relationship exists irrespective of investor attention and is robust to the propensity-score-matching approach. Overall, the results imply that R&D capital makes firms resilient to external shocks.
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"Does Absorptive Capacity Protect Shareholder Wealth in Times of Crisis? Evidence from the COVID-19 Pandemic,"
American Business Review: Vol. 25:
1, Article 6.
Available at: https://digitalcommons.newhaven.edu/americanbusinessreview/vol25/iss1/6