How Do Firm Characteristics Influence the Relationship Between R&D and Firm Value?
AbstractThis paper focuses on how a firm?s characteristics affect the market valuation of its research and development (R&D) spending. We derive a valuation model based on the capital market arbitrage condition. The estimation of this model by using the Generalized Method of Moments and data from the eurozone countries yields interesting results. Several firm characteristics (namely, size, firm growth and market share) are found to positively affect the relationship between firm value and R&D spending, while others (specifically, free cash flow, dependence on external finance, labour intensity and capital intensity) exert a negative effect. Therefore, the effectiveness of the R&D spending depends on the firm characteristics.
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Bibliographic InfoPaper provided by Interuniversity Research Master and Doctorate Program (with a quality mention of ANECA) on "Business Economics", Universities of Valladolid, Burgos, Salamanca and León (Spain). Until 2008, Interuniversity Doctorate Program (with a quality mention of ANECA) “New trends in Business Administration”, Universities of Valladolid, Burgos, and Salamanca (Spain). Master en Investigación y Programa de Doctorado Interuniversitarios (con mención de calidad de la ANECA) en "Economía de la Empresa", Universidades de Valladolid, Burgos, Salamanca y León (España). Hasta 2008, Programa de Doctorado Interuniversitario (con mención de calidad de la ANECA) “Nuevas Tendencias en Dirección de Empresas”, Universidades de Valladolid, Burgos y Salamanca (España). in its series Working Papers "New Trends on Business Administration". Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". with number 2006-09.
Length: 31 pages
Date of creation: Dec 2006
Date of revision:
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Other versions of this item:
- Julio Pindado & Valdoceu de Queiroz & Chabela de la Torre, 2010. "How Do Firm Characteristics Influence the Relationship between R&D and Firm Value?," Financial Management, Financial Management Association International, vol. 39(2), pages 757-782, 06.
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-07 (All new papers)
- NEP-CSE-2007-07-07 (Economics of Strategic Management)
- NEP-INO-2007-07-07 (Innovation)
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- Shah, Syed Zulfiqar Ali & Liang, Shuang & Akbar, Saeed, 2013. "International Financial Reporting Standards and the value relevance of R&D expenditures: Pre and post IFRS analysis," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 158-169.
- Alessandra Tognazzo & Federica Destro & Paolo Gubitta, 2012. "Patenting in family firms," "Marco Fanno" Working Papers 0155, Dipartimento di Scienze Economiche "Marco Fanno".
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