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Author:Saarela, Lauri Olavi
Title:Stock Market Valuation of Tangible and Intangible Investments
Kiinteiden ja aineettomien investointien arvostus osakemarkkinoilla
Publication type:Master's thesis
Publication year:2005
Pages:81+8      Language:   eng
Department/School:Tuotantotalouden osasto
Main subject:Teollisuustalous   (TU-22)
Supervisor:Artto, Karlos
Instructor:Karjalainen, Jouko ; Hyöty, Jussi
OEVS:
Electronic archive copy is available via Aalto Thesis Database.
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Location:P1 Ark Aalto     | Archive
Keywords:valuation
investments
the capital investment process
R&D investments
capital investments
arvostus
investoinnit
investointiprosessi
T&K investointi
kiinteä investointi
Abstract (eng):This thesis studies whether higher research and development (R&D) and capital expenditures (CAPEX) led to higher stock market valuation for STOXX 600 companies and a sample of Finnish companies during 1993-2004 and what were the possible mechanisms that could have caused an increase in the valuation.
Firstly, the abnormal stock returns of investment strategies based on R&D expenditures and on CAPEX are studied by buy-and-hold portfolio analysis and the Fama-French procedure.
Secondly, the operational performance of companies with different investment behavior is studied.

It is documented that R&D expenditures account for a growing portion of corporate investments.
It is shown that STOXX 600 companies with high R&D expenditures are able to earn abnormal stock market returns, but that the abnormal returns for companies with higher CAPEX are smaller.
In addition to higher abnormal returns, also the systematic risk is higher for those companies with high R&D costs, whereas the systematic risk is lower for those companies with higher CAPEX.
Thus, for a company the decision whether to allocate capital into tangible or intangible projects seems to be a trade-off between shareholder's risk and return.

In a capital investment project most of the costs are designed in the beginning of the capital investment process, but the costs are realized only after the authorization phases of the capital investment.
The intensity of CAPEX is greater in the final stages of the capital investment process.
For the R&D investment process the costs incur as the process advances.
Most of the R&D expenditures are related to the search and development phase of the capital investment process and the intensity of the R&D process is greater in earlier stages of the capital investment process.
This study and presumably the financial markets use the cost incidence as an input for assessing CAPEX.
Thus, if the strong form of market efficiency does not dominate, and the markets are at least to some extent inefficient, there is a bigger potential for mispricing R&D investments compared to capital investments.
Abstract (fin):Tässä työssä tutkitaan tuottivatko korkeammat tutkimus ja tuotekehitys- tai kiinteät investoinnit ylisuuria osaketuottoja STOXX 600 -yhtiöille ja joillekin FIM Pankkiiriliikkeen analysoimille yrityksille vuosina 1993 - 2004 ja mitkä ovat mahdolliset mekanismit jotka vaikuttivat arvostukseen.
Aluksi eri T&K investointeihin ja kiinteisiin investointeihin perustuvien investointistrategioiden ylisuurituottoja tutkittiin osta-ja-pidä -portfolio analyysilla ja Fama-French menetelmällä.
Tämän jälkeen mitattiin eritavalla investoivien yritysten operatiivista suorituskykyä.

Tutkimuksessa näytettiin, että T&K investoinnit ovat yhä suurempi osa yhtiöiden kaikista investoinneista.
Tutkimuksessa osoitettiin, että STOXX 600 -yhtiöt, joiden T&K kulut ovat korkeita tuottivat ylisuuria tuottoja, kun taas niiden yritysten, joiden kiinteiden investointien kulut olivat suuria, tuottivat matalampia ylisuuria tuottoja.
Suurten ylisuurien tuottojen lisäksi, systemaattinen riski on korkeampi niille yrityksille, joiden T&K kulut ovat suuret, kun taas systemaattinen riski on matalampi yrityksille, joiden kiinteät investoinnit ovat suuret.
Näin ollen yksittäisen yhtiön päätös investoida joko kiinteisiin tai abstrakteihin kohteisiin on osakkeen omistajan kannalta valinta riskin ja tuoton välillä.

Kiinteiden investointien prosessissa suurin osa kustannuksista suunnitellaan projektin alussa, mutta kustannukset realisoituvat vasta toteutuksessa.
T&K investoinneissa kustannukset syntyvät kun projekti etenee ja kustannukset kohdistuvat varhaisempaan vaiheeseen investointiprosessissa.
Tässä tutkimuksessa ja oletettavasti finanssimarkkinoilla investointien arvioiminen tapahtuu kustannusten selvitessä.
Jos oletetaan, etteivät markkinat toimi täydellisen tehokkaasti, vaan ovat jossain määrin tehottomat, T&K investointien väärin hinnoittelu on todennäköisempää kuin kiinteiden investointien johtuen investointiprosessin läpinäkyvyydestä markkinoille ja kustannusten kohdistumisesta prosessin eri vaiheisiin.
ED:2006-02-03
INSSI record number: 30589
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