R&D innovation indicator and its effects on the market. An empirical assessment from a financial perspective

We propose an alternativefirm-level measure for innovation activities—R&D elasticity—and we analyse itseffects on the Tobin's Q of listed companies on the Euronext 100 Index. Wefind that R&D elasticity is positivelyrelated to market appreciation by stakeholder investors. Moreover, we analyse the role of default risk in therelationship between innovation activities and market value, andfind thatfirms' default probabilities are ne-gatively related to Tobin's Q. Thesefindings are supported by OLS regressions, wherein Tobin's Q is regressed onR&D elasticity,five-year default probability, and controls such as ESG voluntary disclosure. These results furtherthe research aimed at developing a conceptual framework for integrating at a policy level the R&D elasticityindicator as a type of innovation disclosure among the non-financial disclosures released by companies.