Market Valuation of Successful versus Non‐successful R&D Efforts in the Pharmaceutical Industry

Rebecca Toppe Shortridge

Journal of Business Finance & Accounting, 2004, vol. 31, issue 9‐10, 1301-1325

Abstract: Abstract: This paper examines the relationship between a non‐financial measure of successful research and development (R&D) efforts in the pharmaceutical industry and R&D expenditures. I hypothesize that the R&D of successful producers will be valued more by the market than the R&D of non‐successful producers. The regression results support the hypothesis. In the primary model, R&D is not associated with price; however, the coefficient on the interaction between R&D and successful developers is positively related to stock price. This implies that the market values the R&D expenditures of successful developers but not the expenditures of less‐successful developers.

Date: 2004
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https://doi.org/10.1111/j.0306-686X.2004.00575.x

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