250,007 research outputs found
Long CEO tenure, independent directors, and R&D knowledge stock: the moderating effect of performance shortfalls
No full textThis study examines why firms differ in levels of R&D knowledge stock by testing multiple theories of direct and interaction effects of long CEO tenure and independent directors on R&D knowledge stock. Additionally, it tests the moderating effect of performance shortfalls on these relationships.The multiple theories are tested on a sample of 215 FTSE 350 listed firms, using a panel regression and system GMM estimation.The results indicate that firm with long CEO tenure reduced R&D knowledge stock, whereas independent directors is associated with higher R&D knowledge stock. Firms increased R&D knowledge stock when long CEO tenure interact with independent directors. Firms reduced R&D knowledge stock when performance shortfalls interact long CEO tenure. Firms increased R&D knowledge stock when performance shortfall interact with long CEO tenure and independent directors.The findings have implications for CEO succession planning and dynamics of board–CEO relationships. Regulators seeking to promote innovation-driven growth may utilize these findings to develop governance codes that incentivize the appointment of directors who can support knowledge-intensive strategies. Policymakers might consider offering incentives, such as R&D tax credits, to support the innovation advocacy of independent directors and bolster innovation in firms with long-tenured CEOs.This study reconciles competing governance theories with performance feedback theory, thereby contributing to multiple literatures and enrich understanding of the micro-foundations of firms' R&D decisions. The study thus offers a valuable expansion to corporate governance literature
Pharmaceutical Stock Price Reactions to Price Constraint Threats and Firm-Level R&D Spending
No full textPolitical pressure in the United States is again building to constrain pharmaceutical prices either directly or through legalized reimportation of lower-priced pharmaceuticals from foreign countries. This study uses the Clinton Administration's Health Security Act (HSA) of 1993 as a natural experiment to show how threats of price constraints affect firm-level R&D spending. We link events surrounding the HSA to pharmaceutical company stock price changes and then examine the cross-sectional relation between the stock price changes and subsequent unexpected R&D spending changes. Results show that the HSA had significant negative effects on firm stock prices and R&D spending. Conservatively, the HSA reduced R&D spending by $1.6 billion, even though it never became law. If the HSA had passed, and had many small firms not raised capital just prior to the HSA, the R&D effects could have been much larger.
Stock Market Valuation of R&D Expenditures—The Role of Corporate Governance
No full textThis paper examines whether firms with greater research and development (R&D) expenditures earn higher stock returns when they have good corporate governance. After controlling for size, book-to-market ratio, momentum, asset growth, accruals, and abnormal capital expenditures, we determine that R&D-intensive firms indeed earn higher stock returns when they have well-established corporate governance. Our results are robust to a variety of industry fixed-effect controls, governance proxies, model specifications, and panel regression with standard errors adjusted for year clustering. Therefore, our results are not endogenously driven by inherent characteristics. These results suggest that good governance is able to prevent potential overinvestment in R&D spending, thereby increasing the rate of return for R&D spending firms.補正完
Stock returns and foreign investment in Brazil
No full textWe examine the relationship between stock returns and foreign investment in Brazil, and find that the inflows of foreign investment boosted the returns from 1995 to 2005. There was a strong contemporaneous correlation, although not Granger-causality. Foreign investment along with the exchange rate, the influence of the world stock markets, and country risk can explain 73 percent of the changes that occurred in the stock returns over the period. We also find that positive feedback trading played a role, and that the market promptly assimilated new information.stock returns; foreign investment; Brazilian economy
Why are stock market returns correlated with future economic activities?
No full textStock price, because it is a forward-looking variable, forecasts economic activities. An unexpected increase in stock price reflects that (i) future dividend growth is higher and/or (ii) future discount rates are lower than previously anticipated; therefore, the increase predicts higher output and investment. As well, other studies argue for an important relation between the expected stock market return and investment. In this paper, Hui Guo analyzes the relative importance of these mechanisms by using Campbell and Shiller’s (1988) method to decompose stock market return into three parts: expected return, a shock to the expected future return, and a shock to the expected future dividend growth. Contrary to the conventional wisdom, the author finds that dividend shocks are a rather weak predictor for future economic activities. Moreover, the expected return and shocks to the expected future return display different predictive patterns. The results shown here, collectively, explain why the forecasting power of stock market return is rather limited.Stock market
Stock Options and Productivity: An empirical analysis of Japanese firms
No full textThis paper analyzes the relationship between the use of stock options and productivity by employing firm-level panel data from the Basic Survey of Japanese Business Structure and Activities. According to the analysis, the use of stock options has a positive impact on firm productivity. Productivity steadily increases after the adoption of stock options. In addition, we found suggestive evidence that R&D investment increases after the introduction of stock options. These results imply that the deregulation on the use of stock options in 1997 and the subsequent legal reforms have had positive contributions to the productivity performance of Japanese firms.
The Interaction Between Capital Investment and R&D in Science-Based Firms
No full textThis paper analyzes the interaction among R&D, capital investment , and the stock market rate of return for 191 firms in science-based industries for the period 1973-1981. Using a framework based on dynamic factor analysis, we show how several prominent hypotheses about the determination of R&D and investment generate testable parameter restrictions. The data indicate that R&D Granger-causes investment, but that investment does not Granger-cause R&D. We use this finding to examine the validity of those hypotheses, to characterize the movements over time of R&D and investment, and to measure the stock market valuation of these movements.
Stock market development and financial intermediaries : stylized facts
No full textWorld stock markets are booming. Between 1982 and 1993, stock market capitalization grew from 10 trillion, an average 15 percent a year. A disproportionate amount of this growth was in emerging stock markets, which rose from 3 percent of world stock markets capitalization to 14 percent in the same period. Yet there is little empirical evidence about how important stock markets are to long-term economic development. Economists have neither a common concept nor a common measure of stock market development, so we know little about how stock market development affects the rest of the financial system or how corporations finance themselves. The authors collected and compared many different indicators of stock market development using data on 41 countries from 1986 to 1993. Each indicator has statistical and conceptual shortcomings, so they used different measures of stock market size, liquidity, concentration, and volatility, of institutional development, and of international integration. Their goal: to summarize infromation about a variety of indicators for stock market development, in order to facilitate research into the links between stock markets, economic development, and corporate financing decisions. They highlight certain important correlations: (i) In the 41 countries they studied, there are enormous cross-country differences in the level of stock market development for each indicator. The ratio of market capitalization to the gross domestic product (GDP), for example, is greater than 1 in five countries and less than 0.10 in five others. (ii) There are intuitively appealing correlations among indicators. For example, big markets tend to be less volatile, more liquid, and less concentrated in a few stocks. Internationally integrated markets tend to be less volatile. And institutionally developed markets tend to be large and liquid. (iii) The three most developed markets are in Japan, the United Kingdom, and the United States. The most underdeveloped markets are in Colombia, Nigeria, Venezuela, and Zimbabwe. Malaysia, the Republic of Korea, and Switzerland seem to have highly developed stock market, whereas Argentina, Greece, Pakistan and Turkey have underdeveloped in richer countries, but many markets commonly labeled"emerging"(for example, in Korea, Malaysia,and Thailand) are systematically more developed than markets commonly labeled"developed"(for example, in Australia, Canada, and many European countries). (iv) Between 1986 and 1993, some markets developed rapidly in size, liquidity, and international integration. Indonesia, Portugal, Turkey, and Venezuela experienced explosive development, for example. Case studies on the reasons for (and economic consequences of) this rapid development could yield valuable insights. (v) The level of stock market development is highly correlated with the development of banks, nonbank financial institutions (finance companies, mutual funds, brokerage houses), insurance companies, and private pension funds.Markets and Market Access,Economic Theory&Research,Health Economics&Finance,Payment Systems&Infrastructure,Banks&Banking Reform,Economic Theory&Research,Health Economics&Finance,Access to Markets,Markets and Market Access,Banks&Banking Reform
Determinants of Stock Market Prices in Namibia
No full textThis paper investigates the macroeconomic determinants of stock market prices in Namibia. The investigation was conducted using a VECM econometric methodology and revealed that Namibian stock market prices are chiefly determined by economic activity, interest rates, inflation,money supply and exchange rates. An increase in economic activity and the money supply increases stock market prices, while increases in inflation and interest rates decrease stock prices. The results suggest that equities are not a hedge against inflation in Namibia, and contractionary monetary policy generally depresses stock prices. Increasing economic activity promotes stock market price developmentstock market prices; arbitrage pricing theory; cointegration; impulse reponses; Namibia
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