A motivational study of off-balance sheet financing: the case of research and development limited partnerships

The purpose of this paper is to explain the differences observed in the magnitude of abnormal returns of the sponsor firms. A previous study (Durkee and Garment, 1999) indicates that the unexpected positive return of the sponsor firms on the day before public announcement (event day -1) is highly si...

Full description

Saved in:
Bibliographic Details
Published in:The Mid-Atlantic journal of business 2001-12, Vol.37 (4), p.153
Main Authors: Carment, Thomas M, Pourjalali, Hamid, Durkee, David A
Format: Article
Language:English
Subjects:
Abnormal returns
Accounting
Competition
Competitive advantage
Finance
General partners
Intangible assets
Investment companies
Investments
Limited partnerships
R&D
Rates of return
Research & development
Research & development expenditures
Research and development partnership
Stockholders
Studies
Technological innovations
Valuation
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The purpose of this paper is to explain the differences observed in the magnitude of abnormal returns of the sponsor firms. A previous study (Durkee and Garment, 1999) indicates that the unexpected positive return of the sponsor firms on the day before public announcement (event day -1) is highly significant using a two-tailed t-test. This evidence is consistent with the proposition that the voluntary announcement of an R &D limited partnership results in an increase in the wealth of the common shareholders of R &D sponsor firms. The results of this study indicate that the abnormal returns are more fully explained when some measures of risk associated with sponsor companies are included. The market reacts more positively toward those firms that are expected to survive. This observation is notable because the market reaction to the issuance of R&D contracts may also be used (to some degree) as predictive of the future survival of the sponsored firms.
ISSN:0732-9334