PhD Defence Mengfan Liu
In his dissertation, Essays on Financial Disclosure and Innovation, ERIM’s Mengfan Liu examined firms’ incentives to engage in R&D activities and disclose R&D information. The corporate sector wields significant influence over industries and societies in boosting technology developments. Information asymmetry between firms and external investors poses a great challenge to financing R&D projects, leading to companies' uninformed decisions that are prone to flaws. Contributing to our understanding of firms' decision-making processes, Mengfan Liu's research delved into three areas: financial disclosure in the race for R&D, the Chinese stock market with an information disclosure mandate, and the impact of a firm’s political connections on innovation. Results from this research provided valuable insights for policymakers and researchers in formulating policies that encourage investment in innovation activities while addressing the issue of information asymmetry to create a better environment for corporate innovation.
Mengfan defended his dissertation in the Senate Hall at Erasmus University Rotterdam (EUR) on Thursday, 23 November at 13:00. His supervisors were Prof. dr. Jeroen Suijs (EUR) and Dr. Edith Leung (EUR). Other members of the Doctoral Committee were Prof. dr. Erik Peek (EUR), Prof. dr. Hui Chen (University of Zurich), Prof. dr. Maximilian Mueller (University of Cologne), Prof. dr. Jacco Wielhouwer (Vrije Universiteit Amsterdam), Dr. Maria Correia (LSE), Dr. Michael Erkens (EUR).
About Mengfan Liu
Mengfan Liu was born in Hunan, China. In 2011, he completed his Bachelor’s study in Economics at Huazhong University of Science and Technology in China before moving to Frankfurt, Germany where he obtained his Master’s degree in Finance at Frankfurt School of Finance and Management in 2013. Mengfan had worked as a consultant for around three years in the field of development finance. In 2018 Mengfan started his PhD in Accounting at Erasmus Research Institute of Management of the Erasmus University Rotterdam. His research interests include financial disclosure and innovation. He has been investigating corporations’ incentives or disincentives to voluntarily disclose technology-related information and/or make R&D investments. During his PhD, Mengfan visited the London School of Economics and Political Sciences in Spring 2022. Mengfan has been appointed as Assistant Professor at the Vrije University Amsterdam since September 2023.
Thesis Abstract
The corporate sector wields significant influence over industries and societies through its innovation activities. However, the financing of corporate innovation is hindered by information asymmetry, resulting in underinvestment in corporate R&D. A comprehensive understanding of firms' incentives or disincentives to engage in R&D activities and disclose R&D information is crucial for governments and regulatory bodies to make informed decisions regarding the implementation of policies that promote R&D investment. This dissertation investigates firms' incentives for R&D disclosure and investment, presenting empirical and analytical evidence in three areas.
In Chapter 2, firms' strategic concerns regarding R&D disclosure in financial reporting within the context of an R&D race are analysed. The study identifies varying equilibrium disclosure strategies based on investment and disclosure costs. An asymmetric disclosure mandate is proposed as a resolution to selection issues in the asymmetric equilibrium on determining the disclosing and the nondisclosing firm, despite the potential negative spillover effects.
Chapter 3 focuses on a newly established Chinese stock market with a disclosure mandate regarding R&D information, where firms reduce voluntary R&D disclosure when their peers are subject to the mandate. This reduction is primarily driven by cost-saving incentives. Remarkably, the diminished disclosure does not adversely affect stock liquidity.
Chapter 4 examines the impact of a firm's political connections on innovation. By utilizing US special elections as a quasi-natural experiment, the study reveals a negative influence of political connections on firm innovation, indicating a shift from long-term to short-term activities due to managerial short-termism. However, this effect is constrained by various disciplining forces in place. Overall, the findings contribute to our understanding of firms' decision-making processes and outcomes in innovation and aid policymakers and researchers in shaping effective strategies to promote innovation and address information asymmetry in corporate R&D.
View photos of Mengfan's PhD Defence
Photos: Michelle Muus / Michelle Muus Fotografie
