Abstract: The improvement of innovation quality has become an important driving force to promote the breakthrough of the key core technologies and the high-quality development of enterprises, but the problem of “low quality and low efficiency”still exists in the innovation activities of China. In the context of realizing technological independence and self-improvement and practicing innovation-driven development, it is of great significance to explore the influence of the capital market environment on the quality of corporate innovation and to seek breakthrough paths for corporatehigh-quality innovation. This paper conducts and empirical study based on China’s A-share non-financial listed companies in Shanghai and Shenzhen stock markets. The findings show that the inefficient capital market pricing will significantly weaken the quality of corporate innovation and makes them fall into an innovation dilemma. The analysis of the mechanism of action shows that overvaluation of stock prices will lead companies to adopt strategic innovations to cater to investors, while undervaluation of stock prices will weaken the enthusiasm of enterprises to invest in R&D. Both of the two tendencies are not conducive to the improvement of corporate innovation quality. The heterogeneity test reveals that the negative impact of inefficient capital market pricing on corporate innovation quality is more prominent when the corporate equity financing is highly dependent, the short-term performance pressure is high, the information asymmetry is strong, and the agency problems are relatively serious. According to the above empirical evidences, the government can take advantage of the market-oriented reforms to further improve the pricing efficiency of the capital markets; while the enterprises should actively respond to the low-quality innovation-induced tendency under the short-term pressure of the capital market through the optimization of the corporate governance level and the information disclosure environment, so as to effectively enhance their high-quality innovation capabilities.

Key words: capital market pricing, innovation quality, strategic innovation, equity financing dependence, management myopia