An analysis of the R&D effect on stock returns for European listed firms
AbstractAlmost all studies on research and development (R&D) activity are based on US and British companies, and most of them show that this activity positively influences both stock returns and corporate value. This empirical study evaluates the effects of R&D on stock returns for a sample of listed companies from thirteen European countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Spain, Sweden and United Kingdom. We find that this effect is positive, and also significant, in predicting future returns.Other variables appear to be important too, such as book-to-market ratio and firm size. We also test a different set of hypotheses that aim to capture the many differences and peculiarities between these countries such as the development of the national equity and credit markets, the grade of disclosure for listed firms and the protection of minority shareholders. Generally, financial markets value R&D investment better in investorfriendly environments and those with a high level of legal protection.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40012.
Date of creation: 2011
Date of revision:
Publication status: Published in European Journal of Financial Research 4.1(2011): pp. 482-496
European financial markets; market value; R&D; Stock returns; Valuation;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
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