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Girard  (p. 9-22)
Cooper (p. 23-32)
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Stasio (p. 47-56)
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JOURNAL OF APPLIED BUSINESS AND ECONOMICS

Research & Development and Systematic Risk of the Firm:
A Study of the Indian Industries

Author(s): Sangeeta D Misra

Citation: Sangeeta D Misra, (2011) "Research & Development and Systematic Risk of the Firm: A Study of the Indian Industries," Journal of Applied Business and Economics, Vol. 12, Iss. 4, 103. 103 - 121

Article Type: Research paper

Publisher: North American Business Press

Abstract:

This study aims at analyzing the relationship between firm R&D intensity and market risk using crosssectional
data of 333 firms of the Indian industries from 2005 to 2009. For this, a theoretical model has
been developed. The results of the theoretical model show that there is an inverse relationship between
firm R&D intensity and market risk. The empirical results show that after controlling for accounting
variables such as growth (measured by growth rate in sales); dividend pay-out ratio (measured by equity
dividend as a percentage of net profit); asset size (measured by total assets of the firm); age of the firm
(measured by incorporation year of the firm); leverage (measured by debt-equity ratio); liquidity
(measured by current ratio); and sales variability (measured by coefficient of variation in sales) which
also influence market risk, an increase in firm R&D intensity lowers the market risk. The control
variables which have come out to be significant determinants of market risk are dividend pay-out ratio
and sales variability.