DOI QR코드

DOI QR Code

Analysis of R&D Time Lag in impacting Firm Value: GMM- PVAR Study

GMM Panel VAR를 이용하여 R&D가 기업 가치에 영향을 미치기까지의 시간 측정 연구

  • Yang, Insun (School of Business Administration, Hongik University)
  • Received : 2016.05.04
  • Accepted : 2016.07.07
  • Published : 2016.07.31

Abstract

Most previous studies found a positive relationship between the value of a firm and its R&D investments. This research measures the impact of the timescale of the R&D investment of a firm on its value using panel vector autoregression. By measuring the time required for R&D to impact the value of a firm, this study demonstrates that the lead time is an essential factor in the analysis of the effect of R&D investment on a firm's value. Our study finds that the length of the lead time varies according to the firm's size, industry concentration, and book to market ratio. Firms with a higher industry concentration show a shorter lead time. Also, firms with a larger size and higher book to market ratio generally show a shorter lead time.

Acknowledgement

Supported by : 홍익대학교

References

  1. Chan, S. H., Martin, J.D., and Kensinger, J.W., "Corporate research and development expenditure and share value", Journal of Financial Economics, 26, pp. 255-276, 1990. DOI: http://dx.doi.org/10.1016/0304-405X(90)90005-K https://doi.org/10.1016/0304-405X(90)90005-K
  2. Johnson, L. D. and Pazderka B.,, "Firm Value and Investment in R&D", Managerial and Decision Economics. 14, pp. 15-24, 1993. DOI: http://dx.doi.org/10.1002/mde.4090140103 https://doi.org/10.1002/mde.4090140103
  3. Hall, B. H. and Oriani R., "Does the Market Value R&D Investment by European Firms? Evidence from a Panel of Manufacturing Firms in France, Germany and Italy", International Journal of Industrial Organization, pp. 971-993, 2005.
  4. Jung, H Y., Chun S. I. and Kim H. J.,, "The Study of the Relationship between R&D Information and the Firm Value: by Industry", Management Study, 2003.
  5. Yuk, K. H.,"Reanalysis of the Economic Effect of the R&D Investment and Advertisement Expense", Management Study, 18(3), pp. 219-251, 2003.
  6. Shin, M. S, and Kim, S. E., "The Effects of Firm Characteristics on the Relationship between R&D Investment and Firm Value", Journal of Korea Industrial Economics, Vol.24 No.4, pp. 45-73, 2012.
  7. Park H. J., and Bae K. S., "The Relationship between R&D Investment Activity and Firm Value", Journal of Korea Tax and accounting, 47, pp. 27-40, 2016.
  8. Erickson, G., and Jacobson, R., "Gaining comparative advantage through discretionary expenditures: The returns to R&D and advertising," Management Science 38, pp. 1264-1279, 1992. DOI: http://dx.doi.org/10.1287/mnsc.38.9.1264 https://doi.org/10.1287/mnsc.38.9.1264
  9. Chung K. O., Chang W. K., and Kim Y. Y., "The Effect of R&D and Advertisement Expense on the Firm Value", Korean Journal of Business Administration, 18(5) pp. 1851-1867, 2005.
  10. Lev, B., and Sougiannis, T., "The capitalization, amortization, and value-relevance of R&D", Journal of Accounting and Economics, 21, pp. 107-138, 1996. DOI: http://dx.doi.org/10.1016/0165-4101(95)00410-6 https://doi.org/10.1016/0165-4101(95)00410-6
  11. Lee, S. M., "The Study of the Predictive Power of the R&D and Advertisement Expense", Ph.D Thesis, Dankook Univ., 1994.
  12. Paek, M. J., "The Effect of the R&D Investment on the Profit, Sales, and Stock Price", M.A. Thesis, Yeonsei Univ. pp. 46-53, 1994.
  13. Cho Y. M., "The Profit of the R&D Expense and the Effect on the Market Value", Ph.D Thesis, Jeonnam Univ., 1998.
  14. Grabowski, H. G., and Mueller D. G., "Industrial research and development, intangible capital stocks, and firm profit rates", Bell Journal of Economics, 9(2): pp. 328-343, 1978. DOI: http://dx.doi.org/10.2307/3003585 https://doi.org/10.2307/3003585
  15. Ravenscraft, D. J., and Scherer F. M., "The Lag Structure of Returns to Research and Development. Applied Economics", 14, pp. 603-620, 1982. DOI: http://dx.doi.org/10.1080/00036848200000036 https://doi.org/10.1080/00036848200000036
  16. Cho S. P., and Jung J. Y.,"The Multiple Period Profit Analysis of the R&D Expense", Management Research, 30(1), pp. 289-310, 2001.
  17. Delmonte A., and Papagni, E., "R&D and the growth of firms: empirical analysis of a panel of Italian firms", Research Policy, 32(6), pp. 1003-1014, 2003. DOI: http://dx.doi.org/10.1016/S0048-7333(02)00107-5 https://doi.org/10.1016/S0048-7333(02)00107-5
  18. Connolly R., and Hirschey M., "Firm size and the effect of R&D on Tobin's q", R&D Management, 35(2), pp. 217-223, 2005. DOI: http://dx.doi.org/10.1111/j.1467-9310.2005.00384.x https://doi.org/10.1111/j.1467-9310.2005.00384.x
  19. Ho, Y. K., M. Tjahjapranata, and Yap C. M.,"Size, leverage, concentration, and R&D investment in generating growth opportunities", The Journal of Business 79 (2): pp. 851-876, 2006. DOI: http://dx.doi.org/10.1086/499140 https://doi.org/10.1086/499140
  20. Kim B. K.," The Relationship Between R&D and Firm Value: Focused on Size, Liability and Industry", Korean Corporation and Management Review, 15(1), pp. 25-43, 2008.
  21. Shah S. Z., Stark A. W., and Akbar S., "Firm size, sector and market valuation of R&D expenditures", Applied Financial Economics Letters, 4(2), pp. 87-91, 2008. DOI: http://dx.doi.org/10.1080/17446540701537756 https://doi.org/10.1080/17446540701537756
  22. Kim, S. K., and Yeon, R. M., "Effectiveness of R&D Investment on Enterprise Outcome", Accounting Study, 12(3), pp. 1-31, 2007. https://doi.org/10.1007/s11142-006-9020-1
  23. Ehie, I. C., and Olibe K.,"The effect of R&D investment on firm value: An examination of US manufacturing and service industries", International Journal of Production Economics 128 (1): pp. 127-135, 2010. DOI: http://dx.doi.org/10.1016/j.ijpe.2010.06.005 https://doi.org/10.1016/j.ijpe.2010.06.005
  24. Lee J. K., "The Effects of Firm Characteristics on the Relationship between R&D Expenditure and Corporate Value," The Korean Journal of Financial Engineering, 9(2), pp. 77-101, 2010.
  25. Donelson D., and Resutek R., "The effect of R&D on Future Returns and Earnings Forecast", Review of Account Studies, 17(4), pp. 848-876, 2011. DOI: http://dx.doi.org/10.1007/s11142-011-9179-y https://doi.org/10.1007/s11142-011-9179-y
  26. Min B., and Smyth R., "Determinants of R&D intensity and its impact on firm value in an innovative economy in which family business groups are dominant: The case of South Korea," [Internet]available from https://ideas.repec.org/p/mos/moswps/2015-25.html (Accessed June 20, 2016)
  27. Abrigo R. M. A., and Love, I., "Estimation of Panel Vector Auto-regression in Stata,"[Internet], available from http://paneldataconference2015.ceu.hu/Program/Michael-Abrigo.pdf, (Accessed June 22, 2016)
  28. Canova F., and Ciccarelli M., "Panel Vector Autoregressive Models", Eurosystem Central Bank Working paper Series, 1507, 2013.
  29. Love, I., and Zicchino L.,"Financial development and dynamic investment behavior: Evidence from panel VAR", The Quarterly Review of Economics and Finance 46 (2): pp. 190-210, 2006. DOI: http://dx.doi.org/10.1016/j.qref.2005.11.007 https://doi.org/10.1016/j.qref.2005.11.007
  30. Pindado, J., Queiroz V-d., and C-d-l. Torre, "How do firm characteristics influence the relationship between R&D and firm value?" Financial Management 39 (2): pp. 757-782, 2010. DOI: http://dx.doi.org/10.1111/j.1755-053X.2010.01091.x https://doi.org/10.1111/j.1755-053X.2010.01091.x
  31. Connelly, R., and Hirschey, M., "R&D, Market Structure, and Profits: A value-based Approach", The Review of Economics and Statistics, 66(4), pp. 682-686, Nov. 1984. DOI: http://dx.doi.org/10.2307/1935995 https://doi.org/10.2307/1935995
  32. Doukas, J., and Switzer L. N.,"The stock market's view of R&D spending and market concentration", Journal of Economics and Business 44 (2): pp. 95-114, 1992. DOI: http://dx.doi.org/10.1016/0148-6195(92)90009-Y https://doi.org/10.1016/0148-6195(92)90009-Y
  33. Ryan, H. E, and Wiggins, R. A., "The interactions between R&D investment decisions and compensation policy," Financial Management 31(1), pp. 5-29, 2002. DOI: http://dx.doi.org/10.2307/3666319 https://doi.org/10.2307/3666319
  34. Cui, H., and Mak, Y. T., "The relationship between managerial ownership and firm performance in high R&D firms", Journal of Corporate Finance. 8(4), pp. 313-336, 2002. DOI: http://dx.doi.org/10.1016/S0929-1199(01)00047-5 https://doi.org/10.1016/S0929-1199(01)00047-5
  35. Nam, J., Ottoo, R. E., and Thornton, Jr. J.H. (2003). "The effect of managerial incentives to bear risk on corporate capital structure and R&D investment", The Financial Review, 38(1), pp. 77-101, 2003. DOI: http://dx.doi.org/10.1111/1540-6288.00036 https://doi.org/10.1111/1540-6288.00036