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How Do Firm Characteristics Influence the Relationship between R&D and Firm Value?

Author

Listed:
  • Julio Pindado
  • Valdoceu de Queiroz
  • Chabela de la Torre

Abstract

"This 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. Using the generalized method of moments and data from the Eurozone countries to estimate this model yields interesting results. Several firm characteristics (size, firm growth, and market share) positively affect the relationship between firm value and R&D spending, while others (free cash flow, dependence on external finance, labor intensity, and capital intensity) exert a negative effect. Therefore, we conclude that the effectiveness of R&D spending depends on firm characteristics". Copyright (c) 2010 Financial Management Association International.

Suggested Citation

  • 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, June.
  • Handle: RePEc:bla:finmgt:v:39:y:2010:i:2:p:757-782
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1755-053X.2010.01091.x
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    Cited by:

    1. repec:eee:reveco:v:51:y:2017:i:c:p:391-404 is not listed on IDEAS
    2. A. Rashad Abdel-Khalik, 2014. "CEO Risk Preference and Investing in R&D," Abacus, Accounting Foundation, University of Sydney, vol. 50(3), pages 245-278, September.
    3. repec:spr:eujhec:v:18:y:2017:i:5:d:10.1007_s10198-016-0812-3 is not listed on IDEAS
    4. repec:spr:rvmgts:v:12:y:2018:i:1:d:10.1007_s11846-016-0218-8 is not listed on IDEAS
    5. Alessandra Tognazzo & Federica Destro & Paolo Gubitta, 2012. "Patenting in family firms," "Marco Fanno" Working Papers 0155, Dipartimento di Scienze Economiche "Marco Fanno".
    6. repec:bla:stratm:v:38:y:2017:i:4:p:892-911 is not listed on IDEAS
    7. 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.

    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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