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The Effect of R&D Expenses on Earnings and Market Value

Author

Listed:
  • Georgia Pazarzi

    (Hellenic Open University, Open University of Cyprus, Business College of Athens (BCA))

  • John Sorros

    (University of Piraeus)

Abstract

The aim of this paper is to examine the effect that Research and Development (R&D) expenditures have on a company’s market value and earnings. Prior literature shows that R&D expenses have a positive impact on a firm’s market performance, as well as a positive impact on a firm’s earnings. The goal of this paper is not only to test the relation between R&D expenses and earnings and between R&D expenditures and market value, but also to prove that this relation changes as time passes. We show that while R&D expenses have an impact on market value in the short-run, their impact on earnings is stronger in the long-run. The sample consists of the companies listed in the North American Stock exchanges for the period 1993-2013 and for the industrial sector. Our results show a positive relation between R&D expenses and market value and between R&D expenses and earnings.

Suggested Citation

  • Georgia Pazarzi & John Sorros, 2018. "The Effect of R&D Expenses on Earnings and Market Value," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(2-3), pages 39-47, April-Sep.
    • Handle: RePEc:spd:journl:v:68:y:2018:i:2-3:p:39-47
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    R&D expenses; earnings; market capitalization;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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