The Impact Of R&D Investments On IPO Valuation From The Pespective Of Operating Profit

Carrying out R&D activities in the competitive market is an important guarantee for the formation of core competitiveness to enterprises. In recent years, countries and enterprises have gradually strengthened the importance of R&D investments. Especially for the public offering of the enterprise, the public regards R&D investments as an important factor in of the enterprise in development potential and growth. Therefore, it is important to study the related problems of the research and development around the IPO stages.Firstly, based on the relevant literature review about R&D investments and operating profits, R&D investments and IPO valuation, operating profits and IPO valuation, the paper choose 420 corporations listed at 2009 to 2011 in Shanghai and Shenzhen stock market. We establish R&D investment regression model and analysis the impact of the increase of operating profits to R&D investment increment. Also, we remove operating profits factor and reestablish model, to get DRD variable. Then, the paper establish Valuation models considering induced R&D investment. Valuation models will be divided into six phases, respectively, of a listed company before the IPO and post-IPO at different time points, to study the effect of DRD on IPO valuation and size trends. Finally, to validate the model of rationality, using PVAR model study the interactive relationship between operating profits and R&D investments in this special stage before and after the IPO.Empirical results show that the operating profits increase has a positive impact on the increase of R&D investment. Induced R&D investments will also play a positive role and effects do not disappear, but has certain continuity to valuation of the IPO,90 days after the day of the IPO and the day of issued achieved greatest influence. According to Panel VAR model of research results, we can found operating profits on R&D activities has lag of role, lag a period effect maximum. At the same time, R&D activities effect on operating profits does not significantly, which is related to selection of research interval. Because in IPO before and after of operating profits more easy effect by surplus management behavior. While this research results can further proved that established R&D investment model is scientific and rationality in the paper. In general, before and after the IPO, increased operating profits will rise in levels of investment in R&D and R&D investment, particularly induced R&D will promote investors’judgments to enterprise’s market value, while producing positive effects.Through this research, it helps us to clarify the relationship of R&D investments, operating profits and the IPO valuation, and make a supplement to existing theories. The path of operating profits working to IPO valuation, scholar has not made a lot of researches. This research for operating profits for ways to play a role in the market value of enterprises provides a new perspective and idea. Meanwhile, domestic literature on R&D investments and IPO valuation is scarcity, and this period at the time of IPO has a certain originality and significance.