Scale Effects of R&D as Reflected in Earnings and Returns
55 Pages Posted: 4 Mar 2010 Last revised: 9 May 2013
Date Written: April 10, 2011
Abstract
Using returns to scale as a conceptual foundation, we explore how R&D-related earnings performance and earnings variability depend upon firm size. We find that the positive association between the level of future earnings and R&D intensity increases with firm size, and that the positive association between the volatility of future earnings and R&D intensity decreases with firm size, consistent with R&D productivity increasing with scale. We also show that R&D scale is associated with lower market returns, consistent with the idea that R&D investment risk declines with scale.
Keywords: Returns to Scale, Research and Development, Profitability, Return Size Effect
JEL Classification: M41, O30, L20
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Stock Market Valuation of Research and Development Expenditures
By Louis K.c. Chan, Josef Lakonishok, ...
-
The Stock Market Valuation of Research and Development Expenditures
By Louis K.c. Chan, Josef Lakonishok, ...
-
The Risk and Return from Factors
By Louis K.c. Chan, J. Karaceski, ...
-
The R&D Master File Documentation
By Bronwyn H. Hall, Clint Cummins, ...
-
The Level and Persistence of Growth Rates
By Louis K.c. Chan, Jason J. Karceski, ...
-
R&D Accounting and the Tradeoff between Relevance and Objectivity
By Paul M. Healy, Stewart C. Myers, ...
-
R&D Reporting Biases and Their Consequences
By Baruch Lev, Bharat Sarath, ...
-
R&D Reporting Biases and Their Consequences
By Baruch Lev, Bharat Sarath, ...
-
Excess Returns to R&D-Intensive Firms
By Dennis J. Chambers, Ross Jennings, ...