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Should Firms in Emerging Markets Invest in R&D? Evidence from China's Manufacturing Sector.
- Source :
- Journal of Risk & Financial Management; Nov2022, Vol. 15 Issue 11, p517, 17p
- Publication Year :
- 2022
-
Abstract
- Analyzing micro-level firm data from the Chinese manufacturing sector, this study provides compelling evidence that firms in emerging markets that invest in research and development (R&D) for product differentiation significantly increase firm performance as measured by market power, profitability, and earning quality. Privately held (non-state-owned), mid-size, Shenzhen exchange-listed firms experience the largest boost to firm performance when they invest in research and development. However, analyzing the contribution of R&D investment to firm market value, we reveal that while R&D investments are valued by institutional investors, the potential for investment in R&D to boost firm performance is not recognized by individual investors, who dominate Chinese financial markets. This finding suggests that managers may under-invest in R&D if equity compensation comprises a large share of the overall compensation package. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 19118066
- Volume :
- 15
- Issue :
- 11
- Database :
- Complementary Index
- Journal :
- Journal of Risk & Financial Management
- Publication Type :
- Academic Journal
- Accession number :
- 160231445
- Full Text :
- https://doi.org/10.3390/jrfm15110517