R&D intensity and firm valuation: Effect of director and manager incentives
Author(s)
Liu, Maggie Chunhui
Author(s)
Lin, J. S. B.
Date Issued
2017
Publisher
Inderscience Publishers
Journal
International Journal of Services and Standards
Volume
12
Issue
1
Start page
64
End page
78
Abstract
Using a sample of 5829 Taiwanese firm-year observations over the 2008-2012 period, we examine the relationship between R&D expenditure and firm valuation. For the whole sample, we find a significant positive association between R&D investment and firm valuation as measured by Market-to-book ratio. However, we also find the dummy variable for Director and Officers liability insurance to be a highly significant variable. Furthermore, we find that the positive association is only effective for the sub-sample of firms with D&O insurance. This is a natural experiment in which we see the critical moderating role played by the incentive of directors and officers as affected by D&O insurance in the relation between R&D spending and firm value.
SFU Affiliated Publication
Yes
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