Stock price and systematic risk effects of discontinuation of corporate R&D programs

Mohsen Saad and Zaher Zantout

Journal of Empirical Finance, 2009, vol. 16, issue 4, pages 568-581

Abstract: We extend the evidence on whether investors impound efficiently into stock prices new disclosures about corporate R&D programs. We find that firms that disclose the discontinuation of some of their R&D programs experience a significant negative announcement-period stock price response which is worse for growth stocks, for small-size firms, and for firms with low operating cash flow. We find no evidence that R&D discontinuing firms experience an event-induced change in their systematic risk. We find evidence of a one-year-long price reversal; however, it is not robust to controlling for possible risk dimensions for firms with R&D capital that the three-factor model does not capture. Evidently, investors' initial response at disclosures of discontinuation of corporate R&D programs is efficient.

Keywords: Market; efficiency; R&; D; investment; Intellectual; property; rights; Systematic; risk (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6VFG ... 1904e4c0c23d11c7a803
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:empfin:v:16:y:2009:i:4:p:568-581

Access Statistics for this article

Journal of Empirical Finance is edited by R. T. Baillie, G. Bekaert, W. Ferson, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Series data maintained by Heidi Boesdal ().