Earticle

초록

영어

While an extensive literature shows that R&D intensities and increases are positively related to firm performance, there is little research on the valuation of R&D reductions. This paper examines the long-term performance following significant R&D reductions. We find that, contrary to conventional wisdom, large R&D cuts are associated with significantly positive future stock returns. This return drift cannot be explained by a battery of asset pricing factors, including R&D intensities and R&D increases. We explore two potential economic motives behind R&D reductions—R&D spillover and firm life cycle. We show that operating performance deteriorates immediately before R&D reductions but exhibits no abnormal pattern afterward. While firm growth falls substantially and variability in profitability reduces, firms with low or declining investment opportunities outperform. These findings are inconsistent with the spillover hypothesis, but lend support to a firm life cycle story that firms attempt to resolve the overinvestment problem that arises as they move to a lower growth stage. We further show a significant decline in the cost of capital after R&D reductions; however, the market appears to underestimate the improvement in the cost of capital.

목차

Abstract
 1. Introduction
 2. Data
 3. Long-Run Returns following R&D Reductions
  3.1. Long-Run Stock Returns
  3.2. Robustness Checks
 4. Hypotheses and Predictions
  4.1. Spillover Hypothesis
  4.2. Firm Life Cycle Hypothesis
  4.3. Disentangling the Two Hypotheses
 5. Do Spillovers Explain the Return Drift?
  5.1. Stock Returns
  5.2. Operating Performance
  5.3. Analysts’ Forecast Revisions
 6. Exploring the Life Cycle Hypothesis
  6.1. Firm Growth and Overinvestment
  6.2. Variability in Profitability
  6.3. Changes in Cost of Capital
  6.4. Cross-Sectional Determinants
 7. Alternative Explanations
  7.1. Optimal R&D Investment
  7.2. Economic Downturn
  7.3. Managerial Myopia
  7.4 Financial Constraint
 8. Conclusion
 References
 Appendix
 Table
 Figure

키워드

저자

• 한국재무학회

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330