Powell, Ronan
[Verfasser:in]
;
Moltchanski, Kon
[Sonstige Person, Familie und Körperschaft];
Nagm, Fouad
[Sonstige Person, Familie und Körperschaft]
Are Managers’ Perceptions that Investors are Myopic Justified? - A Comparison of the Market’s Assessment of the Returns to Expenditures on R&D, IT and CAPEX
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Titel:
Are Managers’ Perceptions that Investors are Myopic Justified? - A Comparison of the Market’s Assessment of the Returns to Expenditures on R&D, IT and CAPEX
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 12, 2012 erstellt
Beschreibung:
We study whether managers' are correct in their perception that investors are myopic towards more ‘innovative' investments, defined in this paper as those in research and development (R&D) and information technology (IT). We first examine the stock market's relative response to investments using a novel dataset that tracks all investments in R&D, IT and capital expenditures (CAPEX) made by Australian listed firms over the period 1994 to 2006. Continuous disclosure rules in Australia help ensure that the sample is less affected by endogeneity concerns, in which companies might ‘select' which announcements to make, giving rise to a sample selection bias. We report positive and statistically significant cumulative average abnormal returns (CAARs), ranging from 1.65% to 4.45%, which are higher than those reported by previous studies. Investments in R&D and IT generate significantly higher CAARs, even after controlling for the Dotcom bubble period. Long-run value tests also confirm that the marginal value of an additional dollar spent on R&D significantly exceeds that of CAPEX. The results suggest that investors do not react myopically to more ‘innovative' investments. We next examine the determinants of announcement returns, and find some support for firm size, free cash flow, growth options, industry concentration, and whether the firm is a serial announcer. We also show that while investments in R&D and IT result in greater investor uncertainty, controlling for this in our regression models confirms that they continue to generate significantly higher returns than CAPEX. Robustness tests indicate that the higher returns reported for R&D and IT investments cannot be explained by sample specification issues, or potential inherent or omitted risk factors