R&D investment and systematic risk
The present study investigates the relationship between a firm's R&D intensity and the risk of its common stock, by analysing a sample of firms which are more profitable, larger in market capitalization and more R&D intensive than the universe of US-listed firms. The results from the portfolio analysis, Monte Carlos simulations and correlation analysis of our sample show that: (i) R&D intensity is positively related to systematic risk in the stock market; (ii) the greater systematic risk is largely attributable to the greater intrinsic business risk and the greater operating risk of R&D-intensive firms; (iii) R&D-intensive firms carry marginally less financial leverage but they do not differ from other firms in terms of operating leverage; and (iv) our results are particularly strong in the manufacturing sector. For the non-manufacturing sector, the results are not robust for different study periods. Copyright (c) 2004 Accounting and Finance Association of Australia and New Zealand.
Year of publication: |
2004
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Authors: | Ho, Yew Kee ; Xu, Zhenyu ; Yap, Chee Meng |
Published in: |
Accounting and Finance. - Accounting and Finance Association of Australia and New Zealand - AFAANZ, ISSN 0810-5391. - Vol. 44.2004, 3, p. 393-418
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Publisher: |
Accounting and Finance Association of Australia and New Zealand - AFAANZ |
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