THE ANALYSIS OF RESEARCH AND DEVELOPMENT (R&D) ON COMPANIES’ PERFORMANCE: (Empirical Study of Mining Company Listed on Indonesia Stock Exchange)

Antika, Christia Putri (2011) THE ANALYSIS OF RESEARCH AND DEVELOPMENT (R&D) ON COMPANIES’ PERFORMANCE: (Empirical Study of Mining Company Listed on Indonesia Stock Exchange). S1 thesis, UAJY.

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Abstract

It is important for management to realize that Research and Development (R&D) is one of significant companies’ activities that is expected to enhance companies’ future value. The main objective of this study is to examine and discuss the influence of companies’ R&D on companies’ performance. The research sample is 12 mining listed companies in Indonesia Stock Exchange (IDX) that reported Research & Development (R&D) expenditure during period 2006- 2010. A hypothesis was developed and tested use a multiple regression model. Research variables used are Operating Profit Margin (as the dependent variable), R&D intensities (as the independent variable), Debt Equity Ratio and Firm Size. The hypothesis tested into deferent time measurements, which are examined with one-year, three-year, and five-year lags. The hypothesis testing results shows that there is relationship between R&D and companies’ performance. The hypothesis testing with three-year lags shows that R&D affect the companies’ profitability, measured by operating profit margin after three-year lags R&D expensed. The findings from this research imply that R&D expenses affect on company’s profitability. R&D expenses do not have immediate effect on profitability, there is a time lag after which the effects of R&D investment examined with longer time lags than one year. This study been suggested that the effects of R&D expenses on company profitability also examined with longer time lags than one or two years, in order to better the causalities. Therefore, the management has to monitor and evaluate current R&D and be able to design new R&D for the future.

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