Andre Ricardo Reis Costa
Doctorate – Studies on the value of research & development investments and the dichotomy between high and low technologies
Advisor: Prof. Dr. Eduardo Kazuo Kayo
Comission: Profs. Drs. Roy Martelanc, Wilson Toshiro Nakamura and Eduardo Ottoboni Brunaldi
This doctoral dissertation is composed of three papers, one theoretical and two empirical, and its general purpose is to analyze the relevance of R&D expenses for value creation and the current scenario of the dichotomy of high and low technology companies regarding the financial profile of US firms. Recent studies have pointed to a sharp increase in R&D expenses in US companies, increasing the intangibility of assets, and with potential consequences for other financial decisions, such as liquidity. Therefore, the first chapter analyzes the set of incentives underlying the increase in investments in R&D. Contributions from the literature on innovation were organized according to the three scenarios of the value generation function by investment decisions, which are buy, sell and inaction, and allowed to point out, using propositions, evidence of facilitators for the generation of value by R&D. For example, falling input prices can encourage companies in low-tech sectors to engage in R&D projects, leading them to accumulate more cash to protect the stock of newly acquired knowledge without frustrating the payment of obligations. Hence they came similar to companies in sectors often named as high tech. The second article analyzed the relationship between R&D expenses made throughout 2019 and the abnormal returns that occurred around the shock from Covid-19 pandemic. The occurrence of the shock is useful to examine investors' ability to act according to available information and the relationship between the independent variable of interest and the dependent variable with less endogeneity bias, which occurs if the manager is able to manipulate the dependent variable through independent variable of interest. The results of the diff-in-diff regressions pointed out that the positive relationship between abnormal returns and R&D expenses persisted in the face of the shock. Using the shock for triple-diff regressions, high-tech companies registered an advantage in offering returns compared to low-tech companies, suggesting the persistence of the dichotomy of high- and low-tech companies. The third article repeated the use of the Covid-19 shock in diff-in-diff and triple-diff regressions. This time, to analyze the relationship between short-term liquidity and abnormal returns, and the relevance of liquidity to the relationship between abnormal returns and R&D expenditure according to the dichotomy of high-tech versus low-tech companies. A balance between costs and benefits was identified by the accumulation of liquidity, by the inverted “U”-shaped relationship between abnormal returns and the proportion of cash in relation to total assets. Again, given the shock, cash was more relevant for high-tech companies to generate returns from R&D projects than for low-tech companies, in yet another indication of the persistence of the dichotomy.
*Abstract provided by the author