How does the financial environment affect the stock market valuation of R&amp;D spending?

Booth, G. Geoffrey; Junttila, Juha-Pekka; Kallunki, J.; Rahiala, Markku; Sahlström, Petri

doi:10.1016/j.jfi.2005.03.003

Cited by 37 publications

(22 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Hall and Oriani (2006) find that R&D is valued by French and German investors, but not by Italian ones. Booth et al (2006) and Karjalainen (2008) find that investors better value R&D expenditures in a marketbased financial system than those in a bank-based financial system.…”

Section: Related Literature and Hypothesis Developmentmentioning

confidence: 99%

Does the Stock Market Reward Innovation? European Stock Index Reaction to Negative News During the Global Financial Crisis

et al. 2014

View full text Add to dashboard Cite

Section: Related Literature and Hypothesis Developmentmentioning

confidence: 99%

Does the Stock Market Reward Innovation? European Stock Index Reaction to Negative News During the Global Financial Crisis

et al. 2014

View full text Add to dashboard Cite

“…Bank financing also attract interests among the innovations researchers (Bettignies and Brander, 2007;Cassar, 2004;Min et al, 2003;Hwa, 2000;Kim et al, 2009). According to Booth et al (2006), R&D expenditures are more valued in a market-based financial system. These researches introduce financial structure of a country to explain the activity and value of R&Ds.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The second one uses bank financing measures (Bettignies and Brander, 2007). The third one compares countries with different financial systems (Booth et al, 2006). This paper uses overall financial development measures, which do not belong to any of these three categories, as a determining factor for the level of innovative activities.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Financial Development on R&D Activity: Cross-Country Evidence

Hwang

Min

Han

2010

Rev. Pac. Basin Finan. Mark. Pol.

View full text Add to dashboard Cite

The financial environment affects the level of R&D activity of a country. Using the proxy measures of macroeconomic financial environment variables, we show that cross-country differences in R&D activity, including expenditures, researchers, and patents etc., are correlated with the stock market turnover ratio. In particular, we found that the relationship was in direct relation to R&D expenditures or the number of researchers but indirect in relation to R&D outputs such as patents. These results imply that finance structure of an economy could enhance R&D activity through providing efficient resource allocation function. Other proxy measures of the financial environment such as banking sector size or stock market capitalization are not found to be significant. The size of the finance industry does not seem to change the national portfolio toward more high-risk innovative sectors. Financial quality, not size, determines the level of R&D intensity.Keywords: R&D; financial development; stock turnover ratio. * Corresponding author. 381 Rev. Pac. Basin Finan. Mark. Pol. 2010.13:381-401. Downloaded from www.worldscientific.com by UNIVERSITY OF CALIFORNIA @ SAN DIEGO on 08/17/15. For personal use only. 382 • Young-Soon Hwang, Hong-Ghi Min & Seung-Hun Han Rev. Pac. Basin Finan. Mark. Pol. 2010.13:381-401. Downloaded from www.worldscientific.com by UNIVERSITY OF CALIFORNIA @ SAN DIEGO on 08/17/15. For personal use only.

show abstract

“…Booth et al. () show that the market valuation of R&D spending is affected not only by a firm's characteristics, but also by the financial environment within which it operates . Hillier et al.…”

Section: Introductionmentioning

confidence: 99%

How do country‐level governance characteristics impact the relationship between R&D and firm value?

Pindado

Queiroz²,

Torre

2015

R & D Management

View full text Add to dashboard Cite

This article addresses the question of how country‐level governance characteristics moderate the market valuation of research and development (R&D). Using a valuation model and panel data from companies in the European Union, United States, and Japan, we find that effective corporate governance allows the market to better assess a firm's R&D investments. This finding is the conjunction with the effect of the legal system, the financial system, and mechanisms of control. First, as effectiveness of investor protection increases, the market valuation of R&D projects also increases. Second, more developed financial systems do a better job assessing R&D. Third, effective control mechanisms reinforce the positive effect of R&D on a firm's market value. In sum, our findings shed light on how policymakers can increase the benefits from firms' R&D spending and thus foster economic growth and social welfare using these country‐level governance characteristics.

show abstract

How does the financial environment affect the stock market valuation of R&D spending?

Cited by 37 publications

References 33 publications

Does the Stock Market Reward Innovation? European Stock Index Reaction to Negative News During the Global Financial Crisis

Does the Stock Market Reward Innovation? European Stock Index Reaction to Negative News During the Global Financial Crisis

The Influence of Financial Development on R&D Activity: Cross-Country Evidence

How do country‐level governance characteristics impact the relationship between R&D and firm value?

Contact Info

Product

Resources

About