The Relationship between R&D and Performance of Listed Company in China

Using data on R&D over the period 2001-2006 as example, and taking the stock price and operating profit as proxy variable of company's future performance, we examine the relationship between R&D and performance of listed company in Shanghai Stock Exchange of China. Based on multiple linear regression model and VAR model (impulse response function and variance analysis), we find that R&D expenditure positively affect firm performance. The influence duration of R&D on future performance is 8 years, and the impact reaches maximum value 3 years later of R&D investment.