Diminishing Returns to Investment Vis-À-Vis Firm Age

25 Pages Posted: 26 Sep 2009

Date Written: September 25, 2009

Abstract

To the extent that firm information provides data to complete markets, firm characteristics determine value to investors. Contrarily, investors are motivated by prospect theory to bid up firm prices without information especially concerning diminishing returns to investments. The valuation effect of investments is highly subjective in the case of R&D (growth options) and more concrete in regards to capital expenditures (assets-in-place). This study contributes to the investment knowledge frontier by analyzing diminishing returns to research and development (R&D) and capital expenditures in regards to a firm’s age.

Keywords: Investment , Diminishing Returns, Firm Age, Life Cycle

Suggested Citation

Swanson, Zane L., Diminishing Returns to Investment Vis-À-Vis Firm Age (September 25, 2009). Available at SSRN: https://ssrn.com/abstract=1478564 or http://dx.doi.org/10.2139/ssrn.1478564

Zane L. Swanson (Contact Author)

University of Central Oklahoma ( email )

100 North University Drive
Edmond, OK 73034
United States

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