The Value-Relevance Of R&D Expenditure: Experience From Malaysia
AbstractThis paper examines the value relevance of R&D reporting among public listed companies in Malaysia for 2000 and 2001, subsequent to the introduction of FRS 109, Accounting for Research and Development (formerly known as MASB 4) which became effective in 1999. Beginning January 2006, FRS 138, Intangible Assets supersedes FRS 109. FRS 138 prescribes that a firm should expense its research costs and could capitalize the development cost as an intangible asset if the latter is expected to bring future benefits. Otherwise, the development expenditure is to be expensed. Test results based on Ohlson’s (1995) valuation model shows that for capitalizers, the amount of R&D expenditure, either expensed or capitalized, influences the stock prices positively. As for the expensers, even though the amount expensed influences stock prices, this relationship is driven by outliers; when we dropped the outliers, the result was no longer significant. These results indicate that R&D activities of capitalizers are expected to bring future benefits and consequently, lead to higher prices while the R&D activities of expensers are more difficult to evaluate given a small sample size and the presence of outliers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by IIUM Journal of Economis and Management in its journal IIUM Journal of Economics and Management.
Volume (Year): 14 (2006)
Issue (Month): 2 (December)
Research and development; Value-relevance; Capitalisation;
Find related papers by JEL classification:
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Louis K. C. Chan, 2001. "The Stock Market Valuation of Research and Development Expenditures," Journal of Finance, American Finance Association, vol. 56(6), pages 2431-2456, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gairuzazmi Mat Ghani).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.