Journal article
THE WEALTH EFFECTS OF ANNOUNCEMENTS OF R&D EXPENDITURE INCREASES
The Journal of financial research, v 17(2)
1994
Abstract
We examine the effect of announcements of plans to increase R&D expenditures on the stock price of rival firms. We test two alternative hypotheses: the first‐to‐innovate hypothesis versus the free‐rider of spillovers hypothesis. Analysis of 114 announcements of increases in R&D expenditures indicates that rival firms suffer a statistically significant negative abnormal return at announcement, which supports the first‐to‐innovate hypothesis. This result provides a rationale for the potentially costly voluntary disclosure of R&D expenditures. A cross‐sectional analysis of the abnormal returns to rival firms reveals that a highly credible announcement has some spillover effects, and that the rival firm earns a much smaller but positive abnormal return. An important implication is that it is always strategically beneficial for the firm to disclose its future R&D plan.
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Details
- Title
- THE WEALTH EFFECTS OF ANNOUNCEMENTS OF R&D EXPENDITURE INCREASES
- Creators
- Zaher Z. Zantout - Rider UniversityGeorge P. Tsetsekos - Drexel University
- Publication Details
- The Journal of financial research, v 17(2)
- Publisher
- Wiley
- Number of pages
- 12
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:A1994NY67800005
- Scopus ID
- 2-s2.0-84986522888
- Other Identifier
- 991019173693304721
InCites Highlights
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Business, Finance