Finance Seminar（2016-09）

Topic:Reward-Timing Uncertainty, Languages and R&D Investment

Speaker:Xunhua Su, Norwegian School of Economics

Time:Wednesday, 20 April, 10:00-11:30

Place:Room 217, Guanghua Building 2

Abstract:

One of the key features of research and development (R&D) is that the timing of investment reward is uncertain - you do not know when the reward will be materialized. We show that thisreward-timing uncertaintyraises R&D investment due to the convexity of decision makers’ time preferences. To capture such an effect, we measure people’s perceived reward-timing uncertainty using a special structure of languages, socalledfuture-time reference(FTR), which refers to when and how languages mark the timing of events. Weak-FTR language speakers hold less precise beliefs on the timing of future events and perceive higher timing uncertainty. International evidence strongly supports the positive effect of reward-timing uncertainty on R&D at both the country and firm levels. On average, aggregate R&D of the business sector as a percentage of GDP and the firm R&D-to-Assets ratio for weak-FTR countries are respectively 0.18 and 0.6 percentage points higher than those for strong-FTR countries. Within-country analysis based on Belgium, in which both weak- and strong-FTR languages are used, and Difference-in-Differences tests based on Hong Kong, in which a weak-FTR language (Chinese) relative to a strong-FTR language (English) became increasingly important after 1997, further confirm our cross-country results.

Introduction:

Xunhua Suis an Assistant Professor in Finance at Norwegian School of Economics. His Research Interests are Theoretical and Empirical Corporate Finance, Banking and Financial Crisis, Financial Contracts.

//www.nhh.no/en/research-faculty/department-of-finance/fin/cv/su--xunhua.aspx

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