Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/65000
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Title: The R&D premium and takeover risk
Authors: Lin, JC 
Wang, YA
Issue Date: May-2016
Source: Accounting review, May 2016, v. 91, no. 3, p. 955-971
Abstract: To explain why firms with high research and development (R&D) intensity offer their investors higher stock returns, we argue that (1) high R&D capacity relative to firm valuation makes R&D-intensive firms attractive takeover targets, and that (2) the higher takeover probability leads their investors to face higher takeover risk, as proposed by Cremers, Nair, and John (2009), and require higher returns. We find evidence consistent with our hypothesis. Furthermore, we find that takeover probability also relates to large R&D increases, but not to innovation efficiency. Accordingly, we expect and find that takeover risk helps to explain the premium associated with large R&D increases, but not the innovation efficiency premium previously documented.
Keywords: R&D
Takeover risk
Risk premium
Publisher: American Accounting Association
Journal: Accounting review 
ISSN: 0001-4826
EISSN: 1558-7967
DOI: 10.2308/accr-51270
Rights: This is the accepted manuscript of the following article: Lin, J. C., & Wang, Y. (2016). The R&D premium and takeover risk. The Accounting Review, 91(3), 955-971, which has been published in final form at https://doi.org/10.2308/accr-51270.
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