Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country study
Corporate management is often accused of short-term oriented behaviour related to R&D expenditures. This study analyses the influence of R&D volatility and R&D intensity on the market capitalization of pharmaceutical and medical research companies from Europe, considering the institutio...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Vilnius Gediminas Technical University
2022-11-01
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| Series: | Journal of Business Economics and Management |
| Subjects: | |
| Online Access: | https://journals.vilniustech.lt/index.php/JBEM/article/view/17844 |
| _version_ | 1811212284796600320 |
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| author | Marilena Mironiuc Maria Carmen Huian Alina Țaran Mihaela Curea |
| author_facet | Marilena Mironiuc Maria Carmen Huian Alina Țaran Mihaela Curea |
| author_sort | Marilena Mironiuc |
| collection | DOAJ |
| description |
Corporate management is often accused of short-term oriented behaviour related to R&D expenditures. This study analyses the influence of R&D volatility and R&D intensity on the market capitalization of pharmaceutical and medical research companies from Europe, considering the institutional context and several firm characteristics. Panel regression estimations on a sample of 217 companies for 2014–2019 indicate that R&D volatility adversely affects market value. The analysis is conducted on the entire sample and on sub-samples determined based on the positive and negative values of the R&D volatility. This differentiates between the continuous and the disrupting effect of R&D activities and the firm’s shift between exploratory and exploitative innovations. The positive volatility sub-sample provides consistent evidence of a significant negative influence of the R&D volatility on the market value. For the negative volatility sub-sample, R&D intensity and its interaction with R&D volatility have a significant positive effect, consistent over the alternative estimations. We conclude that the market influence of the R&D expenditure is related to the sign of volatility and depends on the proportion of R&D expenditure, especially when the volatility is negative. Our findings provide valuable insights for managers, investors, analysts, and other stakeholders about the market reaction to R&D volatility.
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| first_indexed | 2024-04-12T05:26:33Z |
| format | Article |
| id | doaj.art-4948d3f4b88e4c7eb4d00f37003d00a6 |
| institution | Directory Open Access Journal |
| issn | 1611-1699 2029-4433 |
| language | English |
| last_indexed | 2024-04-12T05:26:33Z |
| publishDate | 2022-11-01 |
| publisher | Vilnius Gediminas Technical University |
| record_format | Article |
| series | Journal of Business Economics and Management |
| spelling | doaj.art-4948d3f4b88e4c7eb4d00f37003d00a62022-12-22T03:46:14ZengVilnius Gediminas Technical UniversityJournal of Business Economics and Management1611-16992029-44332022-11-0123510.3846/jbem.2022.17844Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country studyMarilena Mironiuc0Maria Carmen Huian1Alina Țaran2Mihaela Curea3Department of Accounting, Business Information Systems and Statistics, Faculty of Economics and Business Administration, “Alexandru Ioan Cuza” University of Iasi, Iasi, RomaniaDepartment of Accounting, Business Information Systems and Statistics, Faculty of Economics and Business Administration, “Alexandru Ioan Cuza” University of Iasi, Iasi, RomaniaBusiness Administration Department, Faculty of Business and Administrative Sciences, Istanbul Okan University, Istanbul, TurkeyDoctoral School of Economics and Business Administration, “Alexandru Ioan Cuza” University of Iasi, Iasi, Romania Corporate management is often accused of short-term oriented behaviour related to R&D expenditures. This study analyses the influence of R&D volatility and R&D intensity on the market capitalization of pharmaceutical and medical research companies from Europe, considering the institutional context and several firm characteristics. Panel regression estimations on a sample of 217 companies for 2014–2019 indicate that R&D volatility adversely affects market value. The analysis is conducted on the entire sample and on sub-samples determined based on the positive and negative values of the R&D volatility. This differentiates between the continuous and the disrupting effect of R&D activities and the firm’s shift between exploratory and exploitative innovations. The positive volatility sub-sample provides consistent evidence of a significant negative influence of the R&D volatility on the market value. For the negative volatility sub-sample, R&D intensity and its interaction with R&D volatility have a significant positive effect, consistent over the alternative estimations. We conclude that the market influence of the R&D expenditure is related to the sign of volatility and depends on the proportion of R&D expenditure, especially when the volatility is negative. Our findings provide valuable insights for managers, investors, analysts, and other stakeholders about the market reaction to R&D volatility. https://journals.vilniustech.lt/index.php/JBEM/article/view/17844R&D volatilityR&D intensitymarket valuepositive volatilitynegative volatilitycorporate management |
| spellingShingle | Marilena Mironiuc Maria Carmen Huian Alina Țaran Mihaela Curea Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country study Journal of Business Economics and Management R&D volatility R&D intensity market value positive volatility negative volatility corporate management |
| title | Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country study |
| title_full | Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country study |
| title_fullStr | Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country study |
| title_full_unstemmed | Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country study |
| title_short | Financial market reaction to R&D volatility in the pharmaceutical industry. A multi-country study |
| title_sort | financial market reaction to r d volatility in the pharmaceutical industry a multi country study |
| topic | R&D volatility R&D intensity market value positive volatility negative volatility corporate management |
| url | https://journals.vilniustech.lt/index.php/JBEM/article/view/17844 |
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