R&D investments and high-tech firms' stock return volatility

Sami Gharbi, Jean-Michel Sahut and Frédéric Teulon

Technological Forecasting and Social Change, 2014, vol. 88, issue C, 306-312

Abstract: The empirical evidence suggests that firms in high-tech industries exhibit high stock return volatility. In this paper, we conceive of the R&D investment intensity as a possible explanation for the stock volatility behavior in these industries. We suggest that R&D activities generate information asymmetry about the prospects of the firm and make its stock riskier. Relying on Panel data models, we investigate this relationship for French high-tech firms. We find out a strong positive relationship between stock return volatility and R&D investment intensity. This finding suggests that R&D intensive firms should implement an efficient information disclosure policy to reduce information asymmetry and to avoid excessive stock return volatility.

Keywords: R&D; Idiosyncratic volatility; Risk; Asymmetric information; Stock return; Innovation; High-tech firms (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:88:y:2014:i:c:p:306-312

DOI: 10.1016/j.techfore.2013.10.006

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