Discussion of 'UK evidence on the market valuation of research and development expenditures.' (comment on J. Peter Green, Andrew W. Stark and Hardy M. Thomas in this issue, p. 191)(Special Issue: Selected Papers from the Conference on Empirical Research in Business Finance and Accounting, May 1995)

Article Abstract:

The conclusion that, on average, the market values R&D expenditures as if they were capital expenditures has not been really tested. This is borne out by the non-inclusion of industry as a control variable, despite its being relevant for a number of reasons. Thus, it was not ascertained whether R&D is not merely proxying some other variable. The addition of an intercept to the empirical model which was developed using the 'Ohlson' framework is also likely to change the slope coefficients on the R&D variable. Overall, thus, the market's efficiency in response to R&D expenditures cannot be determined with finality.

Finance, Industrial research

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Majority and minority ownership of publicly-traded firms: a test of the value of control using market multiples

Article Abstract:

The hypothesis that the market values of majority and minority ownership interests are directly proportional to ownership percentages is tested in a parent company-subsidiary setting where both companies are publicly traded. Results suggest that majority shareholders do possess higher-valued subsidiary net assets and income than minority shareholders. However, using a sample of diffusely-held firms, the difference is found not to be attributable to a wealth transfer from minority to majority shareholders but to a discounting of the interests owned by minority shareholders.

Corporations, Models, Analysis, Economic aspects, Subsidiary corporations, Subsidiaries, Stockholders, Book value (Accounting), Value (Economics)

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