Asia Pacific Journal of Business Review

  • 제1권2호
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  • Pages.37-62
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  • 2017
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  • 2466-0043(pISSN)
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  • 2508-4488(eISSN)
경희대학교 경영연구원 (Kyung Hee University Management Research Institute)
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The Effects of Research and Development Expenditure on the Firm Value: Focusing on the Portfolio's Excess Return

  • 투고 : 2016.12.19
  • 심사 : 2017.02.27
  • 발행 : 2017.02.28
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초록

To analyze the effects of R&D expenditure on the firm value of Korean firms, we classified portfolios based on R&D activity levels. After that, we conducted a time-series analysis to assess excess returns from the portfolios. To carry out such an analysis, an empirical analysis of excess returns in the capital market was performed by using the monthly earning rate of stocks from 2000 to 2013. The purpose of this research is to provide basic data on investment to stakeholders in the capital market by analyzing the effects of R&D on the firm value and to overcome scholarly limitations by offering a new model of analysis. The criteria for classifying the portfolios were based on R&D expenditure levels. The analysis models follow the Fama-French Three-Factor Model and the Carhart Four-Factor Model. The analyses results are as follows. Extrapolating monthly profit rates based on R&D expenditure levels, portfolios with low R&D expenditures showed higher earning rates than those with high R&D expenditures. This suggests that high R&D expenditures did not translate into high earning rates. The investor depreciates the R&D expenditures related profitability and the possibility of success in the market, leading to falls in stock prices and a failure to give a positive effect on the firm value. Our research differs from the previous investigations as we carried out an empirical analysis based on the actual investors' attitudes about R&D expenditures and how these can generate excess earnings. Our research results show that the data related to R&D expenditure are not reflected fully in the market.

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