How R&D Premium, Market Power, and State Ownership Affected Stock Returns Before and During the Covid-19 Pandemic: Evidence from Vietnam

This study extends the growing literature on the innovation puzzle by investigating how innovation, market power, and state ownership, influence stock returns in Vietnam. Using Fama–MacBeth regressions and the Carhart four-factor model augmented with R&D intensity, we analyzed a dataset of 31,930 firm-month observations from 2010 to 2021. After controlling for market power and firm characteristics, the results show that a one percent increase in R&D intensity is associated with a 0.577% rise in monthly stock returns. For firms with the most significant market power, the same increase in R&D intensity yields an additional 1.75% return. Among state-owned enterprises (SOEs), the return enhancement is 0.512%. Portfolio-level analysis reveals a robust R&D premium, especially under equal-weighted, though this effect disappears during Covid-19, suggesting sensitivity to market-wide stress. These findings offer empirical support for the competitive advantage and institutional theories, highlighting the strategic value of R&D investment. The study provides practical implications for corporate managers and policymakers aiming to promote innovation-driven performance in emerging markets.