R&D Intensity, Complementary Assets and Firm Value: Time Series Evidence from Turkey

This paper aims to test the value relevance of R&D intensity and complementary assets on quarterly time-series data regarding the R&D activities of Turkish manufacturing sector (comprising BIST listed manufacturing firms) in the period of 1992.Q1-2019.Q3. The presence of a unit root is tested by Augmented Dickey Fuller (1981) and Zivot and Andrews (1992) tests. Following this, one-break Gregory and Hansen (1996) cointegration test is employed to detect structural break in the cointegrating relationship among series. Finally, the long-run coefficients estimated by Stock and Watson (1993)'s method of DOLS indicate that R&D intensity variable relative to net sales has statistically significant and positive effect on firm value, which then turns negative following the break date. The other R&D intensity variable relative to total assets fails to reveal any significant effect on firm value, both in the pre-and post-break date. Besides, complementary (tangible) assets have statistically significant and negative effect on firm value until the break date and this effect reverses following the break date. The break date of 2005.Q1 can be associated with the time-lag effects of several severe crises that the Turkish economy has experienced between 1999 and 2001.