Does the market value R&D investment by European firms? Evidence from a panel of manufacturing firms in France, Germany, and Italy

Bronwyn Hall and R Oriani

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: Several studies based on US and UK data have used market value as an indicator of the firm's expected R&D performance. However, there have been no investigations for the continental countries in the European Union, in part because the analysis is complicated by data availability problems. In this paper we take a first step towards filling this gap using a newly constructed panel dataset of firms which are publicly traded in France, Germany, and Italy. Controlling for either permanent unobserved firm effects or sample selection due to the voluntary nature of R&D disclosure, we find that the relative shadow value of R&D in France and Germany is remarkably similar both to each other and to that in the US or the UK during the same period. In contrast, we find that R&D in publicly traded Italian firms is not valued by financial markets on average. However, when we control for the presence of a single large shareholder, we find that both French and Italian firms have high R&D valuations when no single shareholder holds more than one third of the firm, but that R&D is essentially not valued at all in the remaining firms. (c) 2005 Elsevier B.V All rights reserved.

Keywords: R&D; market value; European companies; control (search for similar items in EconPapers)
Date: 2006-09-01
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Citations: View citations in EconPapers (124)

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Related works:
Journal Article: Does the market value R&D investment by European firms? Evidence from a panel of manufacturing firms in France, Germany, and Italy (2006)
Working Paper: Does the Market Value R&D Investment by European Firms? Evidence from a Panel of Manufacturing Firms in France, Germany, and Italy (2004)
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