cations for the aforementioned findings. R&D expenditures are dependent
only on the prior year’s R&D. The discussion in item 2 is relevant here. The
capital expenditures and dividends equations are unchanged. The new debt
equation once again shows some instability. Capital expenditures and divi-
dends are related to new debt, as they were in the RCOMP (1978–1982) se-
ries. However, the debt/equity ratio has now entered the equation, but the
sign is opposite to expectations. As the debt/equity ratio rises, new debt fi-
nancing should fall, because the cost of new debt should be rising; thus, the
finding is counterintuitive. Moreover, the beta variable, measuring the firm’s
systematic risk, is positively associated with new debt. A similar relation-
ship was found by Switzer (1984).
The stock price was positively affected by dividends and investment in
1979 and 1980, research and development in 1982, and the book value of
common stock, as shown in Table 7.7.^12 However, the financial decision
variables, particularly the dividend variable, tend to be positively associ-
ated with the firm’s stock price. One should notice that the significance lev-
els for the capital expenditures variable tends to decline in the latter years
of the study, 1981 and 1982. The book value of the equity variable domi-
194 COMPARING CENSUS/NSF R&D DATA WITH COMPUSTAT R&D DATA
TABLE 7.7 Stock Price Equation Estimates. Two-Stage Least Squares Regressions
Variables 1978 1979 1980 1981 1982
Constant (t) –0.0170 –0.0461 –0.0780 0.0060 –0.0134
(–2.52) (–4.45) (–6.00) (0.40) (–3.00)
Beta 0.0276 0.0057 0.0268 0.0113 0.0056
(–1.32) (0.78) (3.80) (1.95) (1.99)
Dividends 0.3898 0.2612 0.4345 0.2508 0.2374
(4.75) (1.67) (2.64) (1.75) (3.22)
Investment 0.0551 0.2434 0.3310 –0.1675 0.0194
(1.25) (3.62) (4.46) (–3.85) (0.77)
R&D 0.0431 –0.0248 –0.1490 –0.0059 0.1027
(0.68) (–0.28) (–1.30) (–0.80) (2.55)
Book Value 0.8360 1.4961 1.4833 0.0026 0.8582
(18.18) (19.78) (17.74) (0.95) (21.66)
Patents 0.0547 0.2891 –0.3328 –0.375 0.1438
(0.62) (0.89) (–1.10) (–1.90) (1.51)
LPatents 0.0344 –0.1055 0.4237 0.5218 –0.0207
(0.34) (–0.54) (1.33) (2.29) (–0.28)
R^2 0.760 0.765 0.745 0.057 0.834