R&amp;D investment, firm performance and moderating role of system and safeguard: Evidence from emerging markets

Alam, Ashraful; Uddin, Moshfique; Yazdifar, Hassan; Shafique, Sujana; Lartey, Theophilus

doi:10.1016/j.jbusres.2019.09.018

Cited by 90 publications

(94 citation statements)

References 96 publications

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“…According to 423 firms from 12 developing countries, it was found that the protection of investors is more important than regulatory norms (Alan et al, 2020). Similar results were obtained in another study for 29 developing countries (Korutaru and Biakpe, 2013).…”

Section: Literature Reviewsupporting

confidence: 77%

Rule of Low as Factor of Investments in Ukraine

Blikhar¹,

Golynska²,

Shandra³

et al. 2021

IJEBA

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Section: Literature Reviewsupporting

confidence: 77%

Rule of Low as Factor of Investments in Ukraine

Blikhar¹,

Golynska²,

Shandra³

et al. 2021

IJEBA

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“…For the over‐R&D investment, it could help firms to reach their short‐term goal, such as IPO, to attract investors in the IPO market (Zhou and Sadeghi, 2019). However, when a firm's equity is severely overvalued, even the most efficient managers are unable to provide the performance required to support the excessively high stock valuation (Jensen, 2005; Alam et al ., 2020). Therefore, to avoid disappointing existing shareholders and retain the excessive valuations, managers would eventually undermine some of the firm's core values in the long run.…”

Section: Analysis and Resultsmentioning

confidence: 99%

The long‐run role of innovation in the IPO market: inhibition or promotion?

Zhou

Sadeghi

2021

Accounting & Finance

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This study investigates the long‐term role of innovation in the Chinese IPO market. Innovation outcome (patent) has a promoting effect on the long‐term market, while innovation input (R&D) shows a variable inhibitory control, which turns into a favourable impact four years after the IPO due to lag and cumulative effects. Moreover, this inhibitory effect increases and has no positive turnback in firms with R&D myopic management. Furthermore, government subsidies strengthen the effect of innovation during different periods while weakening the positive effect of innovation input four years after the IPO due to firms' rent‐seeking behaviour aiming to obtain government funds.

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“…Tangibility does not have a significant effect on firm performance. It clarifies that fixed assets do not determine how effectively companies operate (Tripathy and Shaik, 2020; Alam et al , 2020).…”

Section: Resultsmentioning

confidence: 99%

Firm performance: the moderation impact of debt and dividend policies on overinvestment

Nguyen‐Trong

Nguyen

2020

JABES

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PurposeDebt, dividend and investment policy constitutes a company's important financial decisions to determine firm performance. The research emphasizes on the problem of overinvestment, a phenomenon that worsens firm operation. Furthermore, it clarifies the moderation role of debt and dividend policy in mitigating the negative effect of overinvestment on firm performance in the case of Vietnamese listed companies.Design/methodology/approachThe research uses all financial statement of non-financial Vietnamese listed companies on Ho Chi Minh and Hanoi Stock Exchange in the period of 2008–2018. The data are collected from Thomson Reuters Eikon. The final data set is comprised of 669 listed companies. The study measures overinvestment though investment demand function and HP filter. Moreover, the research employs the dynamic model, so it has to apply the SGMM method to deal with the problem of endogeneity caused by the lagged dependent variable.FindingsThe research finds that overinvestment is negatively associated with firm performance. Debt or dividend policy separately can moderate the negative effect of overinvestment on firm performance. However, when these two policies are combined, they lessen the positive interaction impact of each policy due to the substitution between debt and dividend policy.Research limitations/implicationsThe research may have two limitations. Firstly, the research measures overinvestment indirectly through investment demand function and HP filter. These two measures only help identify the sign that companies may have the problem of overinvestment because we cannot determine whether they overinvest or not in reality. Secondly, when using interaction variables, the problem of multicollinearity may be higher, and this may adjust the signs and significance level of variables in the models.Practical implicationsPractically, the research proposes three policy recommendations. Firstly, a company can exploit debt or dividend policy to limit excessive free cash flow in order to constrain the problem of overinvestment. Secondly, a company should enhance its corporate governance to resolve agency problems. Thirdly, the government should make the financial sector more transparent and effective to improve monitoring functions of various parties in the capital market.Social implicationsOverinvestment sometimes can cause social issues. Overinvestment means that companies make ineffective investment. If they continue this situation over a long time, companies may have financial distress or even go bankruptcy. As a result, it will slow down economic growth and increase unemployment in the economy.Originality/valueThe research is supposed to make two great contributions to the existing empirical studies in two aspects. Firstly, it is the first attempt to take into consideration the interaction between overinvestment and financial policies. Secondly, it helps enhance the fundamental stance of the agency theory, which supports the interdependence of debt, dividend and investment policy.

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R&D investment, firm performance and moderating role of system and safeguard: Evidence from emerging markets

Cited by 90 publications

References 96 publications

Rule of Low as Factor of Investments in Ukraine

Rule of Low as Factor of Investments in Ukraine

The long‐run role of innovation in the IPO market: inhibition or promotion?

Firm performance: the moderation impact of debt and dividend policies on overinvestment

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