The size,concentration and evolution of corporate R&D spending in U.S. firms from 1976 to 2010: Evidence and implications

The use of research and development (R&D) spending as an empirical proxy for managerial discretion, information asymmetry and growth opportunities, is pervasive in empirical corporate finance research. Underlying this is the implicit assumption that firms choose levels of R&D to maximize value, given firm and industry characteristics. An alternative framework views the level of R&D spending as subject to idiosyncratic behavior as managers myopically manipulate R&D expenditures to meet short-term earnings goals. Using aggregate firm and industry level data, we find evidence consistent with the view that R&D is determined by firm and industry characteristics. Time invariant firm and industry fixed effects explain most of the cross-sectional variation in observed R&D spending, while time-varying factors like size, profitability, or market-to-book explain little of the cross-sectional variation. We find that R&D spending continues to grow faster than advertising and capital expenditures. We also find no evidence of managerial myopia as corporate aggregate R&D expenditures are growing faster than aggregate profitability and the number of firms that undertake R&D has increased over the period from 1976 to 2010.     

Equity market integration versus segmentation in three dominant markets of the Southern African Customs Union: cointegration and causality tests

Empirical tests of theories of financial market integration and segmentation have predominantly focused on developed OECD countries and the emerging markets of Asia Pacific. This study uses a unique panel of equity market indices from the principal Southern African Customs Union (SACU) markets. It tests the hypothesis of market integration using a cointegration approach. Markets that are found to be integrated are then tested for evidence of Granger causality through an error correction mechanism. Results obtained using VAR modelling techniques are compared to those using an ARDL model. While results lend support to existing trade, macroeconomic and developmental linkages and effects between and within the countries, there is some evidence for the presence of a regional factor common to African Emerging Markets that explains causality from Namibia to South Africa. The results support the view that institution building has progressed, which is considered to be a valuable contribution to growth promotion policies in SSA and market integration throughout financial markets in the SADC community.