publication . Article . 2006

Size, Leverage, Concentration, and R&D Investment in Generating Growth Opportunities

Chee Meng Yap; Yew Kee Ho; Mira Tjahjapranata;
Open Access
  • Published: 01 Jan 2006 Journal: Journal of Business, volume 79, issue 2 March, pages 851-876
Abstract
We show that a firm's ability to reap growth opportunities from R&D investments depends on its size, leverage, and the industry concentration. While the direct effects of these factors are significant, the size-leverage interaction reveals further important insights. Large firms' advantages over small firms disappear as their leverage increases. Specifically, small firms with high leverage reap the greatest growth opportunities. Our results provide explanations for inconsistent findings observed when size and leverage are considered independently in existing studies on value and stock return relevance of R&D investment. We also highlight firm-specific factors th...
Subjects
free text keywords: Direct effects, Stock (geology), Leverage (finance), Finance, business.industry, business, Monetary economics, Valuation (finance), Stock valuation, Stock return, Economics
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