Do R&D and free cash flows increase value relevance in efficient-investment firms? Study on listed companies on the Swiss Stock Exchange

Fiero, Winston and Rudiawarni, Felizia Arni and Sulistiawan, Dedhy and Sergi, Bruno S (2024) Do R&D and free cash flows increase value relevance in efficient-investment firms? Study on listed companies on the Swiss Stock Exchange. In: the 2nd International Society for the Advancement of Financial Economics, 8 - 10 July 2024, Thailand. (Unpublished)

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Abstract

Purpose - This research aims to assess whether research and development (R&D) spending and free cash flow (FCF), which are instruments for business entities to innovate, have value relevance, especially in efficient-investment firms. Design/methodology/approach - This research takes as its object a company listed on the Swiss Stock Exchange for the 2018-2022 period. Testing was carried out using panel data regression. We follow Richardson's (2006) modelling to separate companies that invest efficiently from those that do not. To deepen the analysis, we also divided the sample based on the level of industry competition. Findings – Book value per share has a significant impact on the value relevance of all samples. For investment efficient firms, R&D and free cash flow increase the value relevance of book values and earnings. From an industrial competition perspective, R&D and FCF provide more value relevance of accounting information in competitive industries than in concentrated industries with efficient investment. Practical Implications – This research shows that R&D can only increase the value relevance of earnings in investment efficient firms. In addition, a higher FCF in a company can reduce value relevance due to increased agency conflicts in the business entity, so it is best not to maintain a free cash flow that is too large. Originality/Value – This research provides empirical knowledge regarding the value relevance of R&D expenditures and FCF to share prices for investment efficient firms and assesses this relevance based on the industry competition in which the corporation operates.

Item Type:	Conference or Workshop Item (Paper)
Uncontrolled Keywords:	R&D, free cash flow, value relevance, investment efficiency, industry competition, Swiss Stock Exchange
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Business and Economic > Department of Accounting
Depositing User:	Felizia Arni Rudiawarni 31129
Date Deposited:	14 Jun 2024 01:48
Last Modified:	14 Jun 2024 01:48
URI:	http://repository.ubaya.ac.id/id/eprint/46550

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