Investment success and the value of investment opportunities: evidence from the biotech industry

• Autores: Bixia Xu
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 19, Nº. 7-9, 2009, págs. 527-537
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • The general positive association between investment opportunities and firm market value has been well-documented by prior cross-industry studies. Differently, this study empirically investigates how the market pricing of investment opportunities is conditional upon the perceived firm ability to actually capitalize these opportunities for a specific industry which is characterized by high uncertainty of investment success. Under the proposed investment success framework, I find a nonlinear association between investment opportunities and firm market value, depending on perceived investment success rate. Rapid R&D progress is associated with high market pricing of investment opportunities. Moreover, the effect of R&D progress is asymmetric, depending on the nature of the progress. Results suggest that R&D progress provides risk-relevant information for investment success assessment.