Earnings and Equity Valuation in the Biotech Industry: Theory and Evidence
"We examine how the price-earnings relation varies with the uncertainty about and the quality of a firm's investments. We develop a real option valuation framework to capture investment and abandonment options in the research-intensive biotechnology industry. We hypothesize that the price-earnings relation will be V-shaped and change over the firm"'s "life cycle. We also show how nonfinancial information affects the pricing of earnings. Our empirical findings are based on a sample of 301 biotechnology firms that made IPOs between 1980 and 2000, and are generally consistent with our predictions." Copyright (c) 2008 Financial Management Association International..
Year of publication: |
2008
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Authors: | Joos, Philip ; Zhdanov, Alexei |
Published in: |
Financial Management. - Financial Management Association - FMA. - Vol. 37.2008, 3, p. 431-460
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Publisher: |
Financial Management Association - FMA |
Saved in:
freely available
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