| 摘要Abstract | The purpose of the paper is to understand the role that uncertainty
plays in determining the effect of R&D and advertising expenditures on market
values. Real option literatures indicate that the investment on R&D or
advertising can be viewed as purchase of growth options for firms. The cost of
the investment is interpreted as the premium of the option. The growth option
will be exercised only under favorable market outcome and thus has non-linear
payoffs. Because of the convexity of the growth option, the value of the option
increases with uncertainty in the market that a firm faces. In other words, the
capitalization of R&D and advertising expenditures will be larger if there is
higher uncertainty in the product market.
The role uncertainty plays in determining the valuation of R&D and
advertising expenditures is explored using different sets of sample through
regression analysis and robust OLS estimation. Empirical evidences indicate
that firms facing more uncertainty in the market tend to invest more in R&D
projects but not in advertising expenditure. Managers realize growth option
features of R&D projects and make more investments to capture the benefit of
uncertainty for the value of R&D projects. The option analogy for R&D
investment may well explain high P/E ratios for high-tech or start-up firms,
which have large R&D investments and face higher uncertainty. On the other
hand, it seems that uncertainty does not play an important role in determining
the effect of advertising expenditure on market value, which means that
investors may not view advertising investments as a growth options. Finally,
findings in event study indicate that the abnormal returns over the announcements of new R&D projects increase when there is larger uncertainty
in the market. This again confirms the conjecture that R&D investment is
considered as purchase of a growth option and therefore the value of the
investment is positive correlated to volatility. |