{"title":"Firm-level political risk and corporate R&D investment","authors":"Emmanuel Boah, Nacasius U. Ujah","doi":"10.1016/j.jempfin.2024.101513","DOIUrl":null,"url":null,"abstract":"<div><p>We examine firms’ investment decisions in research and development during political uncertainty using US firm quarterly data from 2005 through 2021. By using quarterly data, we minimize stickiness and overly generalized assumptions. The findings show that firms invest more in research and development in times of high political risk. Monetarily, the significance translates to about $10.6 million injection into research and development. The results are more pronounced for firms in competitive industries, politically sensitive firms, firms with higher growth opportunities, and firms with more liquid assets. The results are robust to the test for correlation, addressing endogeneity, and alternative proxies adopted for the variables of interest. Overall, the findings of this study support the strategic growth option theory, which suggests that firms follow a preemptive strategy in periods of high uncertainty.</p></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"78 ","pages":"Article 101513"},"PeriodicalIF":2.1000,"publicationDate":"2024-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Empirical Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0927539824000483","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
We examine firms’ investment decisions in research and development during political uncertainty using US firm quarterly data from 2005 through 2021. By using quarterly data, we minimize stickiness and overly generalized assumptions. The findings show that firms invest more in research and development in times of high political risk. Monetarily, the significance translates to about $10.6 million injection into research and development. The results are more pronounced for firms in competitive industries, politically sensitive firms, firms with higher growth opportunities, and firms with more liquid assets. The results are robust to the test for correlation, addressing endogeneity, and alternative proxies adopted for the variables of interest. Overall, the findings of this study support the strategic growth option theory, which suggests that firms follow a preemptive strategy in periods of high uncertainty.
期刊介绍：
The Journal of Empirical Finance is a financial economics journal whose aim is to publish high quality articles in empirical finance. Empirical finance is interpreted broadly to include any type of empirical work in financial economics, financial econometrics, and also theoretical work with clear empirical implications, even when there is no empirical analysis. The Journal welcomes articles in all fields of finance, such as asset pricing, corporate finance, financial econometrics, banking, international finance, microstructure, behavioural finance, etc. The Editorial Team is willing to take risks on innovative research, controversial papers, and unusual approaches. We are also particularly interested in work produced by young scholars. The composition of the editorial board reflects such goals.
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