Original scientific paper
https://doi.org/10.1080/1331677X.2022.2048193
Investor sentiment, R&D spending and firm performance
Xin Xiang
orcid.org/0000-0003-2617-2663
Abstract
Prior literature indicates that the stock market is not simply a
sideshow but also a factor that impacts corporate operations and
decisions. This study examines the effect of a noise factor in the
stock market, investor sentiment, on the relationship between the
firm’s R&D spending and firm performance. Using a sample of
publicly traded firms in the Chinese A-share market between
2006 and 2019, the study demonstrates that R&D spending generally
enhances (reduces) firm performance during optimism (pessimism)
periods. Concerning the channels through which investor
sentiment impacts the R&D spending-firm performance relationship,
market-timing effects indicate that firms that time equity
issuance during optimism periods experience a positive R&D
spending-firm performance relationship, whereas firms that initiate
equity repurchase during pessimism periods have a negative
R&D spending-firm performance relationship. For catering effects,
when firms cater to short-horizon investors, R&D spending
reduces firm performance. The results contribute to R&D and
behavioural finance literature
Keywords
Investor sentiment; R&D spending; firm performance; market-timing
Hrčak ID:
302972
URI
Publication date:
31.3.2023.
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