L25 - Firm Performance: Size, Diversification, and ScopeReturn

Innovation activities at firm-level are often significantly influenced by factors that determine the outcome of the innovation process. The primary aim of this paper is to study and empirically verify the role of several determinants that affect company innovations in the European Union. The dataset for the analysis comes from Flash Eurobarometer 394 survey carried out in early 2014 and covers issues related to innovation activities, commercialization of innovation and also public support. We summarize the answers on selected questions from the survey by country, and subsequently based on the dataset, we perform regression analysis. In line with our primary assumptions, our results suggest that R&D activities on firm-level and their support represent the key factors substantially responsible for innovations. The work emphasizes the importance of firm characteristics and substantial differences between different types of innovation. Public sector support of innovation is also crucial.

This paper re-examines the effects that adoption of the International Financial Reporting Standards (IFRS) has had on financial reporting of French listed firms. By analysing the 2004 financial statements of CAC 40 companies, we show that the transition to the IAS/IFRS has a significant impact on the return on equity (ROE) of considered firms by increasing it by 25 basis points on average, compared to the French GAAP. This finding thus suggests an amplified degree of discordance between the ROE, as a crucial measure of firm performance, and the value creation process following the IFRS adoption. From a theoretical viewpoint, Merton (1987)'s capital asset pricing model (CAPM) with incomplete information, which claims its convergence to its traditional version through the reduction of information costs, cannot in fact be valid, owing to divergences in the assessment of a firm's performance.