A Study on the Effect of Research and Development Expenditures on Firm Value and Corporate Performance

A Study on the Effect of Research and Development Expenditures on Firm Value and Corporate Performance

In the modern economy, research and development (R&D) investment is crucial for a company's innovation and long-term growth. This study examines the impact of R&D expenditures on firm performance, specifically Tobin’s Q and stock returns, using data from major global markets: the U.S. (NYSE, NASDAQ), the U.K. (London), Canada (Toronto), and South Korea (KOSPI) from 2015 to 2021. Using time series and cross-sectional tests, along with two-stage least squares (2SLS) regression for verification, the results show that R&D investments positively affect corporate performance (Tobin’s Q) in the NYSE, NASDAQ, and KOSPI markets, but have negative or no effects in London and Toronto. Panel regression results suggest R&D expenditures generally negatively impact stock returns, while 2SLS regression indicates positive effects in NYSE, NASDAQ, and KOSPI, with insignificant impacts in London and Toronto. Overall, R&D expenditures positively influence corporate performance, though outcomes vary by exchanges. These findings highlight the importance of understanding regional differences in R&D investment strategies, offering valuable insights for companies and investors.