This study considers the relationship between market power and multinational involvement through use of a market-valuation approach. Estimation results for a sample of large US multinationals reveal superior valuation effects due to returns from foreign as opposed to domestic operations. This finding is consistent with the hypothesis that returns from the US market tend to be less secure, and therefore less valued, than are returns from foreign markets due to both real (market size, entry barriers, etc.) and institutional (antitrust policies, etc.) differences in competitive environments. Such findings are also consistent with previous suggestions that firms develop markets abroad in order to exploit economic-rent opportunities. These findings remain tentative, however, and await verification in future studies of data from both the United States and abroad. 13 references, 1 table.

Intangible assets, R&D, Advertising expenses, Amortization

This paper finds that the generally favorable assessment of corporate sell-off decisions is most apparent for closely held firms where insider net-buy activity is prevalent during the prior six-month period. This suggests that insider trader activity and ownership structure information are used by the market in the characterization of sell-off decisions as favorable or unfavorable for investors.

ABSTRACT This paper finds that the generally favorable assessment of corporate sell‐off decisions is most apparent for closely held firms where insider net‐buy activity is prevalent during the prior six‐month period. This suggests that insider trader activity and ownership structure information are used by the market in the characterization of sell‐off decisions as favorable or unfavorable for investors.

Consistent with an information-signaling perspective, negative and statistically significant announcement effects are associated with bank loan-loss reserve (LLR) announcements over the 1985–1990 period. Announcement effects differ between money-center and regional banks and also according to the nature of contemporaneous earnings and dividend disclosures. Moreover Information transfer or ‘contagion’ effects are present in that LLR announcements by regional banks decrease the value of both money-center banks and nonannouncing regional banks. These statistically significant contagion effects suggest a link between the asset quality characteristics of money-center and regional bank loan portfolios.

This paper considers a complex relation among R & D, market structure and a market value-based measure of profits. Perhaps of greatest interest, a positive effect of R & D on profits emerges, as does a negative R & D-concentration interaction effect. Both appear robust, and support an and rivalrous view of R & D. Despite substantial interest in the question little direct evidence on research and development (R&D), market structure and profits relations has appeared in the literature. An important exception to this rule is Grabowski and Mueller (hereafter G-M) (1978) who reported a strong effect of R & D on adjusted profit rate data, in addition to an equally strong negative R & Dmarket concentration interaction effect. G-M interpret their findings as support for an intangible capital and rivalrous view of R & D. Alternatively, they are also consistent with the hypothesis that firms in highly concentrated markets pursue R & D less efficiently, or take on riskier projects. In any event, G-M's findings seem inconsistent with a view of R & D as a barrier to entry (see Kamien and Schwartz, 1975). This study extends previous research in at least four respects. First, we adopt a market valued-based measure of profits in order to avoid any bias inherent in accounting profit data due to an expense-as-incurred rather than capitalization and amortization treatment of R & D, advertising and similar expenditures. Second, we evaluate simultaneous influences among profits, R & D, advertising and concentration suggested, but not tested, previously. Third, estimation results are derived using Leamer's SEARCH technique which illustrates the sensitivity of estimates to alternate model specifications. And fourth, we consider an n = 390-firm Fortune 500 sample, which is substantially larger than in previous studies, including firms responsible for nearly 90% of private sector R & D during 1977. Estimation results should therefore be broadly indicative of the economic consequences of R & D.

The use of research and development (R&D) spending as an empirical proxy for managerial discretion, information asymmetry and growth opportunities, is pervasive in empirical corporate finance research. Underlying this is the implicit assumption that firms choose levels of R&D to maximize value, given firm and industry characteristics. An alternative framework views the level of R&D spending as subject to idiosyncratic behavior as managers myopically manipulate R&D expenditures to meet short-term earnings goals. Using aggregate firm and industry level data, we find evidence consistent with the view that R&D is determined by firm and industry characteristics. Time invariant firm and industry fixed effects explain most of the cross-sectional variation in observed R&D spending, while time-varying factors like size, profitability, or market-to-book explain little of the cross-sectional variation. We find that R&D spending continues to grow faster than advertising and capital expenditures. We also find no evidence of managerial myopia as corporate aggregate R&D expenditures are growing faster than aggregate profitability and the number of firms that undertake R&D has increased over the period from 1976 to 2010.