STOCK MARKET VALUATIONS OF R&amp;D AND ELECTRONICS FIRMS DURING TAIWAN'S RECENT ECONOMIC TRANSITION

Chiao, Chaoshin; Hung, Weifeng

doi:10.1111/j.1746-1049.2006.00003.x

Cited by 9 publications

(4 citation statements)

References 46 publications

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“…(2001), providing evidence of mispricing for highly R&D‐intensive firms, suggest that the information about values of those firms be largely intangible. However, the R&D‐associated undervaluation observed by these studies shows that R&D‐intensive firms perform poorly in the past, but well in the future, which is different from the evidence documented by Chiao and Hung (2006). …”

contrasting

confidence: 92%

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The Absence of the Book-to-Market Effect in the Taiwan Stock Market: A Decomposition Approach

Chiao

Hung

Yao

2009

Japanese Economic Review

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This paper examines the absence of the book-to-market equity (BM) effect in the Taiwan stock market, applying the BM decomposition proposed by Daniel and Titman (2006). First, we do not observe a significantly negative correlation between future stock return and intangible return on research-and-development-intensive firms in Taiwan, which is inconsistent with the US evidence documented by Daniel and Titman. Second, undervaluation of research-and-development-intensive firms possibly leads to the absence of the BM effect. Those firms, most of which have low BM, perform well not only in the past, but also in the future, thereby obscuring the BM effect.j ere_485 289..299 JEL Classification Numbers: G12, G14.

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confidence: 92%

“…Chiao and Hung (2006) further point out the existence of the undervaluation of flourishing R&D firms in the Taiwan stock market. Investors are likely to positively value R&D‐intensive firms, but not high enough to eliminate underpricing 1 .…”

Section: Introductionmentioning

confidence: 87%

The Absence of the Book-to-Market Effect in the Taiwan Stock Market: A Decomposition Approach

Chiao

Hung

Yao

2009

Japanese Economic Review

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“…document that R&D expenditures are especially associated with future excess returns in continental Europe, suggesting that R&D is undervalued in these countries. Similarly,Chiao and Hung (2006) find that R&D is mispriced in Taiwan. By contrast, no evidence of R&D mispricing is found in the UK(Al-Horani et al, 2003;and Dedman et al, 2009) or Japan(Nguyen et al, 2010).…”

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confidence: 93%

Does the Riskiness of R&D Outweigh Its Benefits? The Perspective of US Private Lenders

Ciftci¹,

Darrough²

2016

Business Fin & Account

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We investigate the relationship between R&D investments and loan spread. Prior research documents that R&D is associated with greater future benefits and risks, suggesting that the valuation of R&D depends on a tradeoff between the two. Some research finds that bondholders consider that the benefits of R&D outweigh its risks: R&D is negatively associated with bond yields. This is surprising given that debt holders are more concerned about downside risk due to asymmetric payoffs. Using data on private debt from the US, we find an overall positive association between loan spread and R&D intensity, suggesting that the riskiness of R&D appears to outweigh its benefits for private lenders. Furthermore, an asymmetric payoff structure implies that the risks of R&D for lenders increase with default risk. Consistent with this argument, we find a positive association between R&D and loan spread for firms that are smaller, with high default‐risk ratings, unrated (no public debt), or in industries with weaker legal protection. Unrated firms are in the most R&D‐intensive group and make up nearly 60% of the firms with private debt. Consequently, studies that exclude unrated firms are likely to present an incomplete picture of the perspective of debt holders on R&D.

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“…Intangible assets play a significant role, viz., in the valuation of knowledge and technology businesses. R&D-intensive stocks, for example, are often seen outperforming stocks with comparatively less R&D (Chiao and Hung 2006) confirming that R&D capital is positively associated with subsequent stock returns, while market valuations themselves are tempered by the stochastic nature of returns from investments in intangibles (Lev and Sougiannis 1999).…”

Section: Investorsmentioning

confidence: 95%

The persistence of green goodwill

Sunderasan¹,

Singh²

2009

Environ Dev Sustain

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Civil coercion has its limitations, government regulation is only as effective as enforcement and investors base their estimates of firm value on information available from the firms themselves and from other sources. While voluntary disclosure is construed as being selective or incomplete, negative non-financial news such as details of fines imposed for environmental violation is reflected in lower stock prices for a short duration. This paper evaluates the persistence of goodwill capital for a sample of Indian companies from select industries, graded by their environmental performance. We conclude that investor concern differs across industries and that the correlation of environmental performance with firm valuation is, at best, weak and short-lived. Periodic scrutiny and announcement of industry environmental performance by appropriately equipped independent agencies could help coordinate and sustain stake-holder pressure on industry.

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STOCK MARKET VALUATIONS OF R&D AND ELECTRONICS FIRMS DURING TAIWAN'S RECENT ECONOMIC TRANSITION

Cited by 9 publications

References 46 publications

The Absence of the Book-to-Market Effect in the Taiwan Stock Market: A Decomposition Approach

The Absence of the Book-to-Market Effect in the Taiwan Stock Market: A Decomposition Approach

Does the Riskiness of R&D Outweigh Its Benefits? The Perspective of US Private Lenders

The persistence of green goodwill

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