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Title: R&D investment and systematic risk
Authors: Ho, Y.K. 
Xu, Z.
Yap, C.M. 
Keywords: Financial leverage
Monte Carlo simulations
Operating leverage
Operating risk
R&D intensity
Issue Date: 2004
Citation: Ho, Y.K.,Xu, Z.,Yap, C.M. (2004). R&D investment and systematic risk. Accounting and Finance 44 (3) : 393-418. ScholarBank@NUS Repository.
Abstract: The present study investigates the relationship between a firm's R&D intensity and the risk of its common stock, by analysing a sample of firms which are more profitable, larger in market capitalization and more R&D intensive than the universe of US-listed firms. The results from the portfolio analysis, Monte Carlos simulations and correlation analysis of our sample show that: (i) R&D intensity is positively related to systematic risk in the stock market; (ii) the greater systematic risk is largely attributable to the greater intrinsic business risk and the greater operating risk of R&D-intensive firms; (iii) R&D-intensive firms carry marginally less financial leverage but they do not differ from other firms in terms of operating leverage; and (iv) our results are particularly strong in the manufacturing sector. For the non-manufacturing sector, the results are not robust for different study periods. © AFAANZ, 2004.
Source Title: Accounting and Finance
ISSN: 08105391
DOI: 10.1111/j.1467-629x.2004.00116.x
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