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Longitudinal Market Valuation of Unexpectedly Increased R&D Expenditure with the Real Option Logic

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  • Jaeho Lee

    (Kyung Hee University, South Korea)

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    This paper examines how the real option value of R&D expenditure in financial market changes as time proceeds. It examines the relations between the R&D capital and the firm value for 4 years from the time a firm increases its R&D expenditure unexpectedly. The results show that the financial market evaluates the unexpected increased R&D with real option logic. We find that the financial market takes account of the market uncertainty and the technology uncertainty of R&D for the valuation of firms. These effects appear significantly right after the R&D capital increased unexpectedly. However, the lasting period of them is shorter than 1 year. The operational performance doesn’t have any relation with the firm value in our analysis.

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    This chapter was published in: Jaeho Lee , , pages 285-298, 2013.
    This item is provided by ToKnowPress in its series Active Citizenship by Knowledge Management & Innovation: Proceedings of the Management, Knowledge and Learning International Conference 2013 with number 285-298.
    Handle: RePEc:tkp:mklp13:285-298
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