R&D investments and high-tech firms' stock return volatility
AbstractThe empirical evidence suggests that firms in high-tech industries exhibit high stock return volatility. In this paper, we conceive of the R&D investment intensity as a possible explanation for the stock volatility behavior in these industries. We suggest that R&D activities generate information asymmetry about the prospects of the firm and make its stock riskier. Relying on Panel data models, we investigate this relationship for French high-tech firms. We find out a strong positive relationship between stock return volatility and R&D investment intensity. This finding suggests that R&D intensive firms should implement an efficient information disclosure policy to reduce information asymmetry and to avoid excessive stock return volatility.
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Bibliographic InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-218.
Length: 15 pages
Date of creation: 10 Apr 2014
Date of revision:
R&D; Idiosyncratic idiosyncratic volatility; Riskrisk; Asymmetric asymmetric information; Stock stock return; Innovationinnovation; Highhigh-tech firms;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-18 (All new papers)
- NEP-CFN-2014-04-18 (Corporate Finance)
- NEP-CTA-2014-04-18 (Contract Theory & Applications)
- NEP-FMK-2014-04-18 (Financial Markets)
- NEP-INO-2014-04-18 (Innovation)
- NEP-SBM-2014-04-18 (Small Business Management)
- NEP-TID-2014-04-18 (Technology & Industrial Dynamics)
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