The Impact of the R&D Investments towards Short-term Corporate Valuation -- Evidence from Chinese Listed Healthcare Companies

Yezi Chen

doi:10.54691/bcpbm.v31i.2590

Authors

Yezi Chen

DOI:

https://doi.org/10.54691/bcpbm.v31i.2590

Keywords:

healthcare industry, R&D investments, corporate valuation, COVID-19

Abstract

R&D investments impact the corporate valuation in the healthcare industry, and the outbreak of COVID-19 influences their relationship. This paper applied simple linear regression to analyse the influence of R&D investments on corporate valuation among Chinese listed healthcare companies, showing an enormous difference between R&D intensity and personnel. R&D intensity will have a negative relationship with corporate valuation in the current year, while R&D personnel will positively influence it. Further, after the pandemic outbreak, the nexus between corporate valuation and R&D intensity transferred into positive, while its R&D personnel counterpart is still not significant. These results display that it is essential for Chinese listed healthcare companies to improve corporate valuation through altering their R&D policy, such as recruiting R&D personnel, paying attention to R&D investments and their effectiveness, and learning the experience from the epidemic outbreak. In addition, this paper also enriches the literature review of R&D spending and corporate valuation.

Downloads

Download data is not yet available.

References

W.X. Qiao, Interview the organizer of the trillion large healthcare market -- the co-head of the medical and health industry group of Yikai Capital, in: China Business, vol.07, 2022, pp.114-116. DOI: https://kns.cnki.net/kcms/detail/detail.aspx?FileName=JSGZ202207041&DbName=CJFQTEMP

A. Batinti, R. D. Congleton, On the codetermination of tax-financed medical R&D and healthcare expenditures: models and evidence, in: European Journal of Political Economy, vol.54, 2018, pp.175-188. DOI: https://doi.org/10.1016/j.ejpoleco.2018.03.006

E.F. Brigham, J.F. Houston, Fundamentals of financial management, Cengage Learning, 2021.

K. W. Artz, P. M. Norman, D.E. Hatfield, et al., A longitudinal study of the impact of R&D, patents, and product innovation on firm performance, in: Journal of product innovation management, vol.27, 2010, pp.725-740, DOI: https://doi.org/10.1111/j.1540-5885.2010.00747.x

B. Y. Aw, M. J. Roberts, D. Y. Xu, R&D investments, exporting, and the evolution of firm productivity, in: American economic review, vol.98, 2008, pp.451-56, DOI: 10.1257/aer.98.2.451

S. C. Bae, D. Kim, The effect of R&D investments on market value of firms: evidence from the US, Germany, and Japan, in: Multinational Business Review, vol. 11, 2003, pp. 51-76.

H. J. Nam, Y. An, Patent, R&D and internationalization for Korean healthcare industry, in: Technological Forecasting and Social Change, vol.117, 2017, pp.131-137.

J. Kubiczek, W. Derej, Financial performance of businesses in the COVID-19 pandemic conditions–comparative study, in: Polish Journal of Management Studies, vol.24, 2021, pp:183-201.

K. H. Chung, P. Wright, B. Kedia, Corporate governance and market valuation of capital and R&D investments, in: Review of Financial Economics, vol.12, 2003, pp.161-172. DOI: https://doi.org/10.1016/S1058-3300(02)00063-0et

A. R. F. Freihat, R. Kanakriyah, Impact of R&D expenditure on financial performance: Jordanian evidence, in: European Journal of Business and Management, vol.9, 2017, pp.73-83.

D. Ravšelj, A. Aristovnik, The impact of R&D expenditures on corporate performance: evidence from Slovenian and world R&D companies, in: Sustainability, vol.12, 2020, pp.1943. DOI: https://doi.org/10.3390/su12051943

S. Biswas, Can R&D investment reduce the impact of COVID‐19 on firm performance? -evidence from India, in: Journal of Public Affairs, 2021. DOI: https://doi.org/10.1002/pa.2773

Z. Huang, Empirical study on the relationship between R&D expenditure and financial performance of healthcare industry, in: In Proceedings of the 2020 4th International Conference on Management Engineering, Software Engineering and Service Sciences, vol.13, 2020, pp. 118-122. DOI: https://doi.org/10.1145/3380625.3380656

C.Y. He, Y.C. Wen, Y.L. Chang, et al., Analyze the impact of COVID-19 on Chinese economy, in: The Journal of Quantitative & Technical Economics, vol:05, 2020, pp.3-22. DOI: 10.13653/j.cnki.jqte.2020.05.001

A. Rababah, L. Al‐Haddad, M.S. Sial, Z. et al., Analyzing the effects of COVID‐19 pandemic on the financial performance of Chinese listed companies, in: Journal of Public Affairs, vol.20, 2020. DOI: https://doi.org/10.1002/pa.2440

D. Khullar, A. M. Bond, W. L. Schpero, COVID-19 and the financial health of US hospitals, in: Jama, vol.323, 2020, pp.2127-2128. DOI:10.1001/jama.2020.6269

D.S. Peng, H.P. Yuan, Comparative study on financial performance of listed companies in medical device industry, in: Business Accounting, vol.17, 2021, pp.26-31. DOI: https://kns.cnki.net/kcms/detail/detail.aspx?FileName=SYKI202117007&DbName=CJFQ2021

C. Y. Su, Y. N. Guo, K. C. Chai, et al., R&D investments, debt capital, and ownership concentration: a three-way interaction and lag effects on firm performance in China’s pharmaceutical industry, in: Frontiers in Public Health, 2021, pp.1431. DOI: https://doi.org/10.3389/fpubh.2021.708832

C. L. Tan, A. M. Nasurdin, S. F. Yeo, et al., Determinants of research and development project performance: a review and proposed conceptual framework, In International Conference on Intellectual Capital and Knowledge Management and Organisational Learning, 2017.

M. Rabiei, H. Dadkhah, Effects of R&D expenditure on the profitability of Iran industrial firms, in: Research Journal of Applied Sciences, Engineering and Technology, vol.7, 2014, pp. 2846-2850.

H. J. Lee, C. Baek, J. D.Lee, Analysis on time lag effect of firm's r&d investment, in: Journal of technology innovation, vol.22, 2014, pp.1-22. DOI: https://doi.org/10.14383/SIME.2014.22.1.001

J. Zhang, L.H. Zhang, The impact of R&D investment on firm performance: empirical evidence from Chinese listed companies from 2009 to 2011, in: Scientific Decision Making, vol.01, 2014, pp.54-72.

A. D. Kaye, C. N. Okeagu, A. D. Pham, et al., Economic impact of COVID-19 pandemic on healthcare facilities and systems: international perspectives, in: Best Practice & Research Clinical Anaesthesiology, vol.35, 2021, pp.293-306. DOI: https://doi.org/10.1016/j.bpa.2020.11.009

J.Y. Zhou, The nexus between corporate financial risk and R&D investment during the pandemic: based on A-share manufacturing enterprises, in: Sci-Tech & Development of Enterprise, vol.05, 2021, pp.159-161. DOI: https://kns.cnki.net/kcms/detail/detail.aspx?FileName=ZXQK202105058&DbName=CJFQ2021

C.L. Mao, Development status and promotion strategy of healthcare industry in China, in: Economist, vol.03, 2016, pp.63-64.

G. Vanderpal, Impact of R&D expenses and corporate financial performance, in: Journal of Accounting and Finance, vol.15, 2015, pp. 135-149. DOI: https://ssrn.com/abstract=2959290

X.C. Zhao, J.X. Wu, A study on the nexus between R&D expenditure and financial performance of medium and small-sized listed companies, in: Science – Technology and Management, vol.33, 2013, pp.104-108.

B. Cohen, M. Neubert, The influence of pricing strategies on corporate valuation, in: International Journal of Teaching and Case Studies, vol.10, 2019, pp.125-156. DOI: 10.1504/IJTCS.2019.101503

E. G. Demirakos, N. C. Strong, M. Walker, Does valuation model choice affect target price accuracy?, in: European Accounting Review, vol.19, 2010, pp.35-72. DOI: https://doi.org/10.1080/09638180902990630

G.K. Morbey, R&D: Its relationship to company performance, in: Journal of Product Innovation Management: An International Publication of The Product Development & Management Association, vol.5, 1988, pp.191-200. DOI: https://doi.org/10.1111/1540-5885.530191

M. Lee, M. Choi, Analysis on time-lag effect of research and development investment in the pharmaceutical industry in Korea, in: Osong Public Health and Research Perspectives, vol.6, 2015, pp.241-248.