A Panel Study of the Impact of R&D on Financial Performance: Evidence from an Emerging Market

In recent years, innovation and R&D activities have been one of the most important factors affecting the growth strategies of the companies and their financial performance. However, it is the fundamental elements of sustainable economic growth, innovative activities have strategic decision-making characteristics due to their effects on efficiency and market value. The aim of this paper is to investigate the effects of R&D expenditures on the financial performance of 62 production companies listed in Borsa Istanbul in the period of 2008-2017 by using panel data methods. We used return on assets (ROA), return on equity (ROE) as a proxy to measure company performance, and to measure R&D expenditures we considered the R&D intensity and R&D expenditures over total sales as explanatory variables. The empirical findings of this study support the existence of a positive interaction between R&D expenditures and financial performance.