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dc.contributor.authorLev, Baruch-
dc.contributor.authorRadhakrishnan, Suresh-
dc.contributor.authorCiftci, Mustafa-
dc.description.abstractWe examine future excess returns, earnings variability and stock volatility of R&D Leaders and Followers. Drawing on the business strategy literature, which makes a clear distinction between R&D Leaders and Followers, we show that R&D Leaders do earn significant future excess returns, while R&D Followers just earn average returns. We further document that R&D Leaders generate higher future sales growth, and return-on-assets than Followers. We also tackle the perennial question of whether the excess returns subsequent to R&D are due to mispricing or risk, and show that only a small part of the returns can be attributed to risk compensation. Finally, it has been documented that R&D expenditures are strongly associated with future earnings volatility, suggesting that R&D is less reliable (verifiable) an asset than physical capital. We show that the association between R&D intensity and future earnings volatility of R&D Leaders is not lower than that of R&D Followers. Thus, penetrating the population of R&D firms to distinguish between R&D Leaders and Followers, we bridge the chasm between the major findings of the economics/finance strand and the accounting body of R&D research.en
dc.relation.ispartofseriesBaruch Lev-15en
dc.titleThe Stock Market Valuation of R&D Leadersen
dc.typeWorking Paperen
Appears in Collections:Accounting Working Papers

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