| Author: | Green, P. Stark, A. W. Thomas, H. M. |
| Title: | UK evidence on the market valuation of research and development expenditures |
| Journal: | Journal of Business Finance and Accounting
1996 : MAR, VOL. 23:2, p. 191-216 |
| Index terms: | UNITED KINGDOM VALUATION R&D ACCOUNTING |
| Language: | eng |
| Abstract: | This paper estimates a number of annual cross-sectional valuation models for UK Official List firms reporting positive research and development expenditures. The key features of the valuation model are the expression of the excess of market value over book value as a linear function of current residual income (capturing the PV of future residual incomes for assets in place) and current research and development expenditures (capturing the market valuation of research and development expenditures that are yet to have an impact on earnings). The conclusions that can be drawn from the study are that (i) the impact of residual income on market value seems strong; and (ii) there is little evidence that the UK stock market totally fails to recognize the valuation-relevance of research and development expenditures. |
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