@article{NOVA,title={Text-Based Interpretation of Innovation: The Causes and Consequences},author={He, Sherry Xinyao and Zhang, Bohui and Zhao, Xiaofeng},journal={Working Project},year={2026}}
Nearly 60% of firms do not report R&D expenditures, creating significant challenges in accurately assessing the capital resources allocated to innovation. To address this issue, we utilize an array of machine learning techniques to estimate firms’ hidden R&D investments. A novel out-of-sample test—leveraging firms that report R&D for the first time—demonstrates that certain methods, particularly neural networks, exhibit superior predictive accuracy in identifying hidden R&D. Among firms with missing R&D data, the estimated hidden R&D reliably predicts both the quantity and value of their patents. Additionally, incorporating the estimated hidden R&D significantly enhances the empirical explanatory power of the Q-theory of investment. Our findings carry important normative implications, revealing that over time, the aggregate estimated hidden R&D may surpass the reported R&D.
@article{MLRD,title={Uncovering Hidden R&D Expenditures: A Machine Learning Perspective},author={He, Sherry Xinyao and Kang, Jun-Koo and Zhang, Hong},journal={Working Paper},year={2025}}
15th Financial Markets and Corporate Governance Conference
The global supply chain encompasses not only good production but also the byproduct of waste. Do firms exploit this property to benefit domestic production? Utilizing China’s Solid Waste Import Ban (CSWIB) as a regulatory shock, we observe that the Producer Price Index (PPI) for U.S. waste-generating industries rose by 2.94% due to increased production costs post-CSWIB. Furthermore, firms within waste-generating sectors also exhibit a 6.49% drop in Tobin’s Q. Our findings suggest that global waste management significantly affects inflation and firm valuation in the U.S., which carry important normative implications for global green transitions.
@article{CSWIB,title={Ripple Through Garbage: The Impact of China's Solid Waste Import Ban on U.S. Firms},author={Chen, Tao and He, Sherry Xinyao and Sun, Stephen Teng and Zhang, Hong},journal={Working Paper},year={2024},}