The valuation relevance of R&D expenditures: Time series evidence |
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Authors: | Jeffrey L Callen Mindy Morel |
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Institution: | Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, Ontario, Canada M5S2E3 |
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Abstract: | The literature on the valuation relevance of R&D investments is based primarily on cross-sectional regressions or panel data regressions with time and firm (or industry) fixed effects such that the parameters relating R&D to market value are cross-sectionally constant. In an alternative approach, this paper investigates the value relevance of R&D investment using an earnings-based time series valuation model. Model parameters are estimated for each firm separately. In contradistinction to the results obtained from cross-sectional and fixed effects panel models, this study finds weak empirical support at best for the value relevance of R&D expenditures at the firm level. |
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Keywords: | G12 O32 |
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