Author Identifier
Erwei Xiang
https://orcid.org/0000-0001-9950-6148
Document Type
Journal Article
Publication Title
Journal of Contemporary Accounting & Economics
Publisher
Elsevier
School
School of Business and Law
RAS ID
31851
Funders
Edith Cowan University - Open Access Support Scheme 2020
Abstract
The relation between the volatility of R&D expenditure and stock return may be influenced by disruptive adjustment costs, emerge from earnings management, or reflect the actions of managers attempting to control the overinvestment of technocrats. Using 5,178 publicly listed US firms from 1980 to 2018, we find a negative relation between R&D volatility and return, which is moderated by firm size. We conclude that investors react negatively to the disruptive effect of changes to R&D expenditure, except for small firms. In small firms, the benefit of the governance mechanism of varying R&D expenditure to control overinvestment outweighs the cost of disruption.
DOI
10.1016/j.jcae.2020.100211
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Comments
Xiang, E., Gasbarro, D., Cullen, G., & Ruan, W. (2020). Does R&D expenditure volatility affect stock return?. Journal of Contemporary Accounting & Economics, Article 100211. https://doi.org/10.1016/j.jcae.2020.100211