Journal article
The Valuation of Corporate R&D Expenditures: Evidence from Investment Opportunities and Free Cash Flow
Financial management, v 25(1), pp 105-110
01 Apr 1996
Abstract
We examine the role of investment opportunities and free cash flow in explaining R&D-induced abnormal returns. After controlling for firm size, financial leverage, dividend yield, ownership structure, and industry structure, we find a significant positive relation between a firm's Tobin's q and its stock price reaction to announcements of increases in R&D expenditures. This result supports the investment opportunities hypothesis. We find a lack of support for the free cash flow hypothesis from a joint examination of Tobin's q and cash flow. Finally, we find that R&D-induced abnormal returns are also positively related to the percentage increase in R&D spending the firm's debt ratio, and institutional ownership.
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Details
- Title
- The Valuation of Corporate R&D Expenditures: Evidence from Investment Opportunities and Free Cash Flow
- Creators
- Samuel SzewczykGeorge TsetsekosZaher Zantout
- Publication Details
- Financial management, v 25(1), pp 105-110
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:A1996VE06500008
- Other Identifier
- 991019168082704721
InCites Highlights
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Business, Finance