SEO valuation and insider manipulation of R&D
We examine a sample of 674 SEOs from 1999-2010 where reduced R&D spending is significantly associated with the lowering of insider ownership proportions. With this association established, we derive an R&D manipulation variable measuring underinvestment in R&D. We add to the...
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2016-07-01
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doaj-da765826c2ae4aa58a705c2005b964df2020-11-25T02:07:48ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations 1810-49671812-93582016-07-0113226727810.21511/imfi.13(2-2).2016.017305SEO valuation and insider manipulation of R&DRobert M. Hull0Sungkyu KwakRosemary L. WalkerProfessor, Clarence W. King Endowed Chair in Finance, Washburn University School of BusinessWe examine a sample of 674 SEOs from 1999-2010 where reduced R&D spending is significantly associated with the lowering of insider ownership proportions. With this association established, we derive an R&D manipulation variable measuring underinvestment in R&D. We add to the SEO-R&D literature by examining the relation between R&D underinvestment and common stock valuation around SEOs. In contrast to the IPO research, we do not find that underinvestment in R&D leads to greater SEO stock valuations during the offer price setting process. Like the IPO research, we find that underinvestment in R&D leads to lower stock valuations for short-run post-offering tests. In contrast to the long-run IPO results, we find a significant association between R&D manipulation and stock valuation for long-run post-offering tests where underinvestment in R&D is associated with lower stock valuations. We also find the five % owner group for SEOs is important in explaining R&D manipulation and discover that underpricing for SEOs is not related to R&D manipulation. These latter two findings are different from IPOs. In conclusion, SEOs can be quite different from IPOs when examining the association between the insider manipulation of R&D and stock valuationhttps://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/7305/imfi_en_2016_02cont2_Hull.pdf |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Robert M. Hull Sungkyu Kwak Rosemary L. Walker |
spellingShingle |
Robert M. Hull Sungkyu Kwak Rosemary L. Walker SEO valuation and insider manipulation of R&D Investment Management & Financial Innovations |
author_facet |
Robert M. Hull Sungkyu Kwak Rosemary L. Walker |
author_sort |
Robert M. Hull |
title |
SEO valuation and insider manipulation of R&D |
title_short |
SEO valuation and insider manipulation of R&D |
title_full |
SEO valuation and insider manipulation of R&D |
title_fullStr |
SEO valuation and insider manipulation of R&D |
title_full_unstemmed |
SEO valuation and insider manipulation of R&D |
title_sort |
seo valuation and insider manipulation of r&d |
publisher |
LLC "CPC "Business Perspectives" |
series |
Investment Management & Financial Innovations |
issn |
1810-4967 1812-9358 |
publishDate |
2016-07-01 |
description |
We examine a sample of 674 SEOs from 1999-2010 where reduced R&D spending is significantly associated with the lowering of insider ownership proportions. With this association established, we derive an R&D manipulation variable measuring underinvestment in R&D. We add to the SEO-R&D literature by examining the relation between R&D underinvestment and common stock valuation around SEOs. In contrast to the IPO research, we do not find that underinvestment in R&D leads to greater SEO stock valuations during the offer price setting process. Like the IPO research, we find that underinvestment in R&D leads to lower stock valuations for short-run post-offering tests. In contrast to the long-run IPO results, we find a significant association between R&D manipulation and stock valuation for long-run post-offering tests where underinvestment in R&D is associated with lower stock valuations. We also find the five % owner group for SEOs is important in explaining R&D manipulation and discover that underpricing for SEOs is not related to R&D manipulation. These latter two findings are different from IPOs. In conclusion, SEOs can be quite different from IPOs when examining the association between the insider manipulation of R&D and stock valuation |
url |
https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/7305/imfi_en_2016_02cont2_Hull.pdf |
work_keys_str_mv |
AT robertmhull seovaluationandinsidermanipulationofrd AT sungkyukwak seovaluationandinsidermanipulationofrd AT rosemarylwalker seovaluationandinsidermanipulationofrd |
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