Organization capital effect in stock returns—The role of R&D

Konan Chan, Mei‐Xuan Li, Chu‐Bin Lin and Yanzhi Wang

Journal of Business Finance & Accounting, 2022, vol. 49, issue 7-8, 1237-1263

Abstract: Previous studies document a strong organization capital effect in stock returns. We investigate whether and how research and development (R&D) activities affect this organization capital effect. We find that the organization capital effect is stronger in firms with R&D activities. The annual abnormal return of the hedge portfolio sorted by organization capital is 2.41% for R&D firms but only 0.41% for non‐R&D firms. Further analyses show that the organization capital effect can be attributed to R&D characteristics rather than R&D risk factors.

Date: 2022
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