R&D Expenditures and Analysts’ Earnings Forecasts

Taoufik Elkemali ()
Additional contact information
Taoufik Elkemali: Accounting Department, College of Business Administration, King Faisal University, Al-Ahsa 31982, Saudi Arabia

Forecasting, 2024, vol. 6, issue 3, 1-17

Abstract: Previous research provides conflicting results regarding how R&D expenditures impact market value. Given that financial analysts are the primary intermediaries between companies and investors, our study focused on the impact of R&D-related uncertainty, growth, and information asymmetry associated on analysts’ earnings forecasts. Based on 19,834 firm-year observations in the European market between 2005 and 2020, our results show that R&D activities lead to higher absolute forecast error and negative forecast error, indicating higher forecast inaccuracy with an optimistic bias. Additionally, these investments contribute to higher forecast dispersion, indicating disagreement among financial analysts. The comparison between 17 industries revealed that these effects are more pronounced in R&D-intensive industries than in non-R&D industries, uncovering the varied relationship between R&D investments and analyst forecasts across sectors.

Keywords: research and development (R&D); earnings; forecast inaccuracy; optimism; forecast dispersion (search for similar items in EconPapers)
JEL-codes: A1 B4 C0 C1 C2 C3 C4 C5 C8 M0 Q2 Q3 Q4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2571-9394/6/3/29/pdf (application/pdf)
https://www.mdpi.com/2571-9394/6/3/29/ (text/html)

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: https://EconPapers.repec.org/RePEc:gam:jforec:v:6:y:2024:i:3:p:29-549:d:1430640

Access Statistics for this article

Forecasting is currently edited by Ms. Joss Chen

More articles in Forecasting from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().