R&D effects, risks and strategic decisions: evidence from listed firms in R&D-intensive countries

摘要

Purpose: The purpose of this research is to look at the effects of research and development expenditures (R&D) on value and risks of publicly traded companies by studying returns on stock exchanges of R&D-intensive economies (Republic of Korea, Finland and Israel). Design/methodology/approach: Empirical tests of multifactor asset pricing models were applied to demonstrate that R&D intensity could be considered as a pricing factor and affect investors’ risk premiums on those markets. To discover the reasons behind the asset pricing R&D anomaly, this study investigated the nature of R&D risk further by looking into the interactions of R&D and currency risks. Findings: This study discovered that investors in stock markets of R&D-intensive countries should require a positive equity risk premium. However, the reduction of R&D intensity may increase firms’ risks and firms with higher R&D-intensity are less exposed to currency risks in R&D-intensive economies. Originality/value: Many researchers have investigated the relationship between a firm’s R&D and stock returns. But nearly all of them focus on the US Stock Market and attempt to determine the reasons for R&D’s impact on firms’ risks and market value. Meanwhile, the role of R&D and related risks for investors could be even more prominent for stock markets in R&D-intensive countries. To bridge this gap, this research studied stock returns on exchanges of three developed countries where the ratio of gross domestic expenditure on R&D (GERD) to GDP is among the highest worldwide. In this study, the methodology of asset pricing empirical studies was adopted and it was further developed to analyze the causes of R&D risks. The new methodology was applied to discover relationship between R&D intensity and currency risk exposure. The interesting findings could be used for development of firms’ corporate strategies in those countries and for elaboration of policy decisions.