Capitalization of R&D costs and earnings management: Evidence from Italian listed companies
AbstractThe capitalization of research and development (R&D) costs is a controversial accounting issue because of the contention that such capitalization is motivated by incentives to manipulate earnings. Based on a sample of Italian listed companies, this study examines whether companies' decisions to capitalize R&D costs are affected by earnings-management motivations. Italy provides a natural context for testing our hypothesized relationships because Italian GAAP allows for the capitalization of R&D costs. Using a Tobit regression model to test our hypotheses, we show that companies tend to use cost capitalization for earnings-smoothing purposes. The hypothesis that firms capitalize R&D costs to reduce the risk of violating debt covenants is not supported.
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Bibliographic InfoArticle provided by Elsevier in its journal The International Journal of Accounting.
Volume (Year): 43 (2008)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/inca/620179
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- Guillaume Dumas, 2012. "Le Comportement Myopique D'Investissement En R&D : Une Realite En France ?," Post-Print hal-00690955, HAL.
- Constant Djama & Guillaume Dumas & Isabelle Martinez, 2011. "L'innovation : une incitation à la gestion des résultats ?," Post-Print hal-00650418, HAL.
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