R&D Investment And Stock Return

In the framework of PCAPM,the dissertation constructs the theoretical models consisting of physical capital investment and R&D investment to investigate how the R&D investment will affect the stock return of enterprises and how the product market competition and financial constraints will affect the relationship between the R&D investment and the stock return.With the 2007-2017 monthly data of A-share listed companies,we do the empirical research and a variety of robustness tests by using the portfolio selection method,capital asset pricing regression method and micro econometric regression method.The main findings are:First,based on the PCAPM consisting of physical capital investment and R&D investment we proposed,we show that the stock return of enterprise is the increasing function of the R&D capital.Because the R&D capital comes from the increase of the R&D investment,the stock return is the increasing function of the R&D investment.And the R&D elasticity of output will strengthen the positive relationship between the R&D investment and the stock return to a certain extent.Our theoretical model explains the reason why R&D investment can increase stock returns from the perspective of total factor productivity(TFP).With the 2007-2016 monthly data of A-share listed companies,we do the empirical research and a variety of robustness tests and get the same results with our theoretical model.Furthermore,we study the companies in the high-tech industries.We find that the high tech companies with relatively higher R&D elasticity of output have not only higher stock returns but also significant positive correlations between the R&D investments and the stock returns.Second,considering different enterprises facing different degree of product market competition,we propose a theoretical model based on the PCAPM to investigate how the product market competition will affect the relationship between the R&D investment and the stock return.We show that the higher degree of product market competition on one hand will increase the stock return directly,on the other hand will help enterprise to improve cash flow,and strengthen the positive correlation between the R&D investment and the stock returns.With the 2007-2016 monthly data of A-share listed companies,we do the empirical research and a variety of robustness tests and get the same results with our theoretical model.Third,considering different enterprises having different level of financial constraints,we propose a theoretical model based on the PCAPM to investigate how the financial constraint will affect the relationship between the R&D investment and the stock return.We show that the higher level of financial constraint will promote enterprise to improve R&D efficiency,and strengthen the positive correlation between the R&D investment and the stock returns.With the 2007-2017 monthly data of A-share listed companies,we do the empirical research and a variety of robustness tests and get the same results with our theoretical model.In summary,our theoretical models and empirical tests show that R&D investment will increase stock return,and the higher degree of competition in the product market and the higher level of financial constraint,the more positive impact of the R&D investment on the stock return.Therefore,in order to increase the stock market return of the R&D investment,the enterprises should increase the R&D investment and improve the R&D efficiency,and try best to become the leader of the industry.Our country needs to cultivate good innovation environment,including the strengthening of enterprise technical support,improving the intellectual property protection system,deepening the market-oriented reforms and improving the financing environment.