The Effect of R&D Expenditure (Investments) On Firm Value: Case Of Istanbul Stock Exchange

Abstract

The relationship between Research and Development (R&D) and creating value has been widely discussed in the past. Most of the studies revealed that there were positive relationships between R&D investments and firm value. The research has shown that R&D investments create value for firms due to their competitive advantages for the firm, when they are used as a differentiation strategy that creates new products of processes that are hard to be easily imitated by the competitors and that this creates brand equity. This study tested the ability of R&D investments to explain returns using single and multiple variable regression models. It was observed that (i) there were positive and strong relationships between the intensity of R&D investments and returns and (ii) firm size, contrary to expectations, was not related with returns.

Keywords

• R&D,firm value,stock returns,frirm size.

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