The Moderator Role of Managerial Overconfidence in the Relationship between R&D Volatility and Firm Value: An Application in Borsa Istanbul

Purpose: The study aims to reveal the moderating role of managerial overconfidence in the link between R&D volatility and firm value in firms operating in the Metal Goods Sector of Borsa Istanbul during the period 2010-2020. Design/Methodology: The moderating role of managerial overconfidence in the linkage between R&D volatility and firm value is investigated with panel data analysis. Findings: The short-run estimates reveal positive linkage determined between R&D volatility and firm value. We also reveal that managerial overconfidence positively moderates the link between R&D volatility and firm value. In this direction, the effect of R&D volatility on firm value is higher and positive in firms where managers have excessive self-confidence. Limitations: The fact that the sample consists of students who are only in Gaziantep and the use of three variables as a brand component are the limitations of the study. Originality/Value: The number of studies in the literature on the relevant period and sample is limited. Therefore, the study contributes to the literature and is original.

Anahtar Kelimeler:

R&D Volatility, Firm Value, Managerial Overconfidence, BIST

Keywords:

R&D Volatility, Firm Value, Managerial Overconfidence, BIST,

PDF

___

Baltagi, B. & Q. Li (1991). A joint test for serial correlation and random individual effects. Statistics and Probability Letters, 11, 277-280. https://doi.org/10.1016/0167-7152(91)90156-L
Baltagi, H. B. (2005). Econometric analysis of panel daata. England: Wiley.
Born, B. & J. Breitung (2016). Testing for serial correlation in fixed-effects panel data models. Econometric Reviews, 35(7), 1290-1316. https://doi.org/10.1080/07474938.2014.976524
Breusch, T. & A. Pagan (1980). The lagrange multiplier test and its applications to model specification in econometrics. Review of Economic Studies, 47(1), 239-253. https://doi.org/10.2307/2297111
Duppati, G., Sune, A., & Samanta, N. (2017). Corporate governance, research and development volatility and firm performance-Evidence from Spain and Ireland. Cogent Economics & Finance, 5(1), 1-16. https://doi.org/10.1080/23322039.2017.1317117
Ehie, I. C. & K. Olibe (2010). The effect of R&D investment on firm value: An examination of US manufacturing and service industries. International Journal of Production Economics, 128(1), 127-135. https://doi.org/10.1016/j.ijpe.2010.06.005
Gao, Y., & Han, K. S. (2022). Managerial overconfidence, CSR and firm value. Asia-Pacific journal of accounting & economics, 29(6), 1600-1618. https://doi.org/10.1080/16081625.2020.1830558
Geroski, P. & S. Machin (1992). Do innovating firms outperform non‐innovators? Business Strategy Review, 3(2), 79-90. https://doi.org/10.1111/j.1467-8616.1992.tb00030.x
Hai, B., Gao, Q., Yin, X., & Chen, J. (2020). R&D volatility and market value: the role of executive overconfidence. Chinese Management Studies. 14(2), 411-431. https://doi.org/10.1108/CMS-05-2019-0170
Hall, B. H. (1987). The relationship between firm size and firm growth in the US manufacturing sector. The Journal of Industrial Economics, 35(4), 583–606. https://www.nber.org/system/files/working_papers/w1965/w1965.pdf
Hao, X., Sun, Q., & Xie, F. (2020). Does foreign exchange derivatives market promote R&D? International industry-level evidence. Economic Modelling, 91, 33-42. https://doi.org/10.1016/j.econmod.2020.05.019
Ho, Y. K., Keh, H. T., & Ong, J. M. (2005). The effects of R&D and advertising on firm value: An examination of manufacturing and nonmanufacturing firms. IEEE Transactions on Engineering Management, 52(1), 3-14. 10.1109/TEM.2004.839943
Im, K., Pesaran, H. and Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115, 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
Johnson, L. D. & B. Pazderka (1993). Firm value and investment in R&D. Managerial and Decision Economics, 14(1), 15-24. https://doi.org/10.1002/mde.4090140103
Kim, W. S., Park, K., Lee, S. H., & Kim, H. (2018). R&D investments and firm value: evidence from China. Sustainability, 10(11), 1-17. https://doi.org/10.3390/su10114133
Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties”. Journal of Econometrics, 108(1), 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
Mudambi, R., & Swift, T. (2011). Proactive R&D management and firm growth: A punctuated equilibrium model. Research Policy, 40(3), 429-440. https://doi.org/10.1016/j.respol.2010.10.014
Mudambi, R., & Swift, T. (2014). Knowing when to leap: Transitioning between exploitative and explorative R&D. Strategic Management Journal, 35(1), 126-145. https://doi.org/10.1002/smj.2097
Patel, P. C., Guedes, M. J., Soares, N., & da Conceição Gonçalves, V. (2018). Strength of the association between R&D volatility and firm growth: The roles of corporate governance and tangible asset volatility. Journal of Business Research, 88, 282-288. https://doi.org/10.1016/j.jbusres.2017.12.033
Peseran, H. (2004). General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics Working Paper, 435.
Pindado, J., De Queiroz, V., & De La Torre, C. (2010). How do firm characteristics influence the relationship between R&D and firm value? Financial Management, 39(2), 757-782. https://doi.org/10.1111/j.1755-053X.2010.01091.x
Swift, T. (2013). R&D expenditure volatility and firm performance: Organizational and environmental contexts. International Journal of Innovation and Technology Management, 10(04), 1-17. https://doi.org/10.1142/S0219877013500132
Topaloğlu, E. E. (2018). Bankalarda finansal kırılganlığı etkileyen faktörlerin panel veri analizi ile belirlenmesi. Eskişehir Osmangazi Üniversitesi İktisadi ve İdari Bilimler Dergisi, 13(1), 15-38. https://doi.org/10.17153/oguiibf.344856
Xiang, E., Gasbarro, D., Cullen, G., & Ruan, W. (2020). Does R&D expenditure volatility affect stock return? Journal of Contemporary Accounting & Economics, 16(3), 1-15. https://doi.org/10.1016/j.jcae.2020.100211
https://www.finnet.com.tr