More Evidence That Corporate R&D Investment (and Effective Boards) Can Increase Firm Value
Tong, J.Y. and Zhang, F.F. (2014) More Evidence That Corporate R&D Investment (and Effective Boards) Can Increase Firm Value. Journal of Applied Corporate Finance, 26 (2). pp. 94-100.
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The authors find that higher R&D expenditures generally lead to both higher expected future cash flow and a lower cost of equity. In addition, they find that the positive connections between R&D spending and higher expected future cash flow and lower cost of equity are stronger in companies with more effective boards (as indicated by measures of director independence and experience). Such findings should help senior executives overcome any concern that investors may not give full credit to R&D investments because they are fully expensed and lead to lower reported earnings in the short term.
|Publication Type:||Journal Article|
|Murdoch Affiliation:||School of Management and Governance|
|Copyright:||Cantillon and Mann|
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