Investment success and the value of investment opportunities: evidence from the biotech industry

Bixia Xu

Applied Financial Economics, 2009, vol. 19, issue 7, 527-537

Abstract: The general positive association between investment opportunities and firm market value has been well-documented by prior cross-industry studies. Differently, this study empirically investigates how the market pricing of investment opportunities is conditional upon the perceived firm ability to actually capitalize these opportunities for a specific industry which is characterized by high uncertainty of investment success. Under the proposed investment success framework, I find a nonlinear association between investment opportunities and firm market value, depending on perceived investment success rate. Rapid R&D progress is associated with high market pricing of investment opportunities. Moreover, the effect of R&D progress is asymmetric, depending on the nature of the progress. Results suggest that R&D progress provides risk-relevant information for investment success assessment.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09603100801982646 (text/html)
Access to full text is restricted to subscribers.

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:taf:apfiec:v:19:y:2009:i:7:p:527-537

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603100801982646

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().