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The Effect of R&D Expenses on Earnings and Market Value

Author

Listed:
  • Georgia Pazarzi

    (Hellenic Open University, Open University of Cyprus, Business College of Athens (BCA))

  • John Sorros

    (University of Piraeus)

Abstract

The aim of this paper is to examine the effect that Research and Development (R&D) expenditures have on a company’s market value and earnings. Prior literature shows that R&D expenses have a positive impact on a firm’s market performance, as well as a positive impact on a firm’s earnings. The goal of this paper is not only to test the relation between R&D expenses and earnings and between R&D expenditures and market value, but also to prove that this relation changes as time passes. We show that while R&D expenses have an impact on market value in the short-run, their impact on earnings is stronger in the long-run. The sample consists of the companies listed in the North American Stock exchanges for the period 1993-2013 and for the industrial sector. Our results show a positive relation between R&D expenses and market value and between R&D expenses and earnings.

Suggested Citation

  • Georgia Pazarzi & John Sorros, 2018. "The Effect of R&D Expenses on Earnings and Market Value," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(2-3), pages 39-47, April-Sep.
    • Handle: RePEc:spd:journl:v:68:y:2018:i:2-3:p:39-47
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    References listed on IDEAS

    as
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    Cited by:

    1. Oleksii Myronenko, 2024. "Estimating the influence of research and development expenditures on the income of companies revenue in the field of engineering of innovative developments under the conditions of changing project man," Eastern-European Journal of Enterprise Technologies, PC TECHNOLOGY CENTER, vol. 2(13 (128)), pages 66-74, April.

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    More about this item

    Keywords

    R&D expenses; earnings; market capitalization;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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