R&D Strategy and Stock Price Volatility in the Biotechnology Industry (ABSTRACT)
published: 2006 | Research publication | Refereed Journals - Accounting
Xu, B. (2006). "R&D Strategy and Stock Price Volatility in the Biotechnology Industry". Review of Accounting and Finance, 5 (1), 71-86.
ABSTRACT: The purpose of this study is to explore how R&D strategies selected by biotech firms affect their share price volatilities. Specifically, the paper empirically investigates the impact of drug discovery and development diversification on share price volatility. Regression analysis is applied to observe the effect of R&D strategy on share price volatility. Share price volatility is regressed on the measure of drug discovery and development diversification. Strategies are classified into two categories: diversified vs concentrated. The major finding of this study is the significant impact of R&D strategy in terms of drug discovery and development diversification on share price volatility. Firms that have more diversified drug portfolios are associated with lower share price volatilities; and lower stock returns. In contrast, firms that have more concentrated drug portfolios are associated with higher share price volatilities; and higher stock returns.
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revised Oct 3/06
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