Board structure, intra-industry competition, and the R&D announcement effect

Yin-Hua Yeh*, Pei Gi Shu, Fu Sheng Ho, Yu Hui Su

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


The main purpose of this paper is to investigate how investors perceive and respond to a firm's R&D announcement. We propose that board structure and intra-industry competition jointly dictate the announcement return. In addition, we assume that investors prefer carefully scrutinized R&D investments to mitigate asymmetric-information risks. Finally, we assume that investors prefer a sustainable R&D investment to prevent intense intra-industry competition and to ensure profit potential. We use a sample of 229 announcements made by 116 Taiwanese listed firms to verify our postulation. Our postulation is the abnormal returns are positively correlated with board independence while negatively correlated with board size. We construct two variables to capture intra-industry competition: (i) the number of days that have elapsed since a competitor's prior announcement and (ii) the ordinal number of announcements in the same industry. Our results show that the announcement effect is negatively correlated with industry R&D intensity. The negative effect is partially ameliorated when the lapse since a prior competitor's announcement is long. Moreover, the announcement effect is also lower when the announcing firm has a high-level of R&D intensity and has experienced numerous prior R&D announcements in the same industry.

Original languageEnglish
Article number1250011
JournalReview of Pacific Basin Financial Markets and Policies
Issue number2
StatePublished - 1 Jun 2012


  • R&D announcement
  • board structure
  • industry competition

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