Real options reasoning and a new look at the R&D investment strategies of pharmaceutical firms

2003 ◽  
Vol 25 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Rita Gunther McGrath ◽  
Atul Nerkar
Keyword(s):  
Real Options ◽  
Investment Strategies ◽  
Pharmaceutical Firms ◽  
D Investment ◽  
New Look

The relation between R&D accounting treatment and the risk of the firm: Evidence from the Italian market

2014 ◽  
pp. 33-54 ◽  
Author(s):  
Riccardo Cimini ◽  
Alessandro Gaetano ◽  
Alessandra Pagani
Keyword(s):  
Earnings Management ◽  
Fiscal Year ◽  
Investment Strategies ◽  
Capital Assets ◽  
Italian Market ◽  
D Investment ◽  
Firm Evidence

In this paper, we investigate the relation between the different accounting treatments of R&D expenditures and the risk of the entity in order to identify under which treatment insiders are more likely to carry out earnings management. By analysing the R&D investment strategies of a sample of 137 listed Italian entities that complied with the requirements of IAS 38 during fiscal year 2009, following Lantz and Sahut (2005), we calculate several indexes that show the preferences of insiders to account R&D expenditures as costs or capital assets, and we study the relation of such preferences with the risk of the entity, which we measure with the unlevered beta. We hypothesize that the entities, which considered the R&D investments as costs, are the riskiest ones due to the higher probability that insiders carried out earnings management. Our results confirm such hypothesis. This paper could have implications for academics and standard setters that could learn that behind accounting discretion, insiders could opportunistically behave against outsiders.

R&D investment behavior of US pharmaceutical firms

2017 ◽  
Vol 9 (2) ◽  
pp. 205-219 ◽  
Author(s):  
Michal Jirásek
Keyword(s):  
Pharmaceutical Industry ◽  
Random Effect ◽  
Investment Behavior ◽  
Theoretical Assumption ◽  
Industry Studies ◽  
Content Type ◽  
Pharmaceutical Firms ◽  
The Us ◽  
Single Industry ◽  
D Investment

Purpose The behavioral theory of the firm (BTOF) has been used to explain the research and development (R&D) investment behavior of firms in numerous multi industry studies. However, their partially contradictory results point to the possible need for a single industry perspective that would reduce heterogeneity of business trends, models and other characteristics. This study aims to test this theoretical assumption within the challenging context of the US pharmaceutical industry. Design/methodology/approach The research uses data from 20 firms, which number among the largest in the US pharmaceutical industry, over the period 2002-2014. These data are analyzed using fixed- and random-effect panel models. Findings The findings generally support the need for a thorough understanding of the industry under study and its specific characteristics. The firms analyzed in this research behave slightly differently from theoretical assumptions, and it is argued that this is caused by industry specific factors. Moreover, the use of two separate aspiration measures – for historical and social aspirations – is supported as it provides more in-depth insight into the firms’ behavior. Originality/value This paper, which is based on research presented at the 4th International Conference on Innovation and Entrepreneurship, represents the first inquiry into the R&D investment behavior of pharmaceutical firms using the BTOF. It also represents an argument for conducting single-industry rather than multi industry studies when using this theory.

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