Does R&D expenditure volatility affect stock return?

E. Xiang, D. Gasbarro, G. Cullen, Wenjuan Ruan

Research output: Contribution to journalArticlepeer-review


The relation between the volatility of R&D expenditure and stock return may be influenced by disruptive adjustment costs, emerge from earnings management, or reflect the actions of managers attempting to control the overinvestment of technocrats. Using 5,178 publicly listed US firms from 1980 to 2018, we find a negative relation between R&D volatility and return, which is moderated by firm size. We conclude that investors react negatively to the disruptive effect of changes to R&D expenditure, except for small firms. In small firms, the benefit of the governance mechanism of varying R&D expenditure to control overinvestment outweighs the cost of disruption.
Original languageEnglish
Article number100211
JournalJournal of Contemporary Accounting & Economics
Issue number3
Publication statusPublished - 3 Jun 2020


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