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The relation between R&D intensity and future market returns: does expensing versus capitalization matter?

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  • Howard Chan
  • Robert Faff
  • Philip Gharghori
  • Yew Ho

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  • Howard Chan & Robert Faff & Philip Gharghori & Yew Ho, 2007. "The relation between R&D intensity and future market returns: does expensing versus capitalization matter?," Review of Quantitative Finance and Accounting, Springer, vol. 29(1), pages 25-51, July.
    • Handle: RePEc:kap:rqfnac:v:29:y:2007:i:1:p:25-51
    DOI: 10.1007/s11156-007-0023-1
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    7. Boone, Jeff P. & Raman, K. K., 2001. "Off-balance sheet R&D assets and market liquidity," Journal of Accounting and Public Policy, Elsevier, vol. 20(2), pages 97-128.
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    16. Zaher Z. Zantout & George P. Tsetsekos, 1994. "The Wealth Effects Of Announcements Of R&D Expenditure Increases," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 205-216, June.
    17. Connolly, Robert A & Hirschey, Mark, 1984. "R&D, Market Structure, and Profits: A Value-Based Approach," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 682-686, November.
    18. Johnson, O, 1967. "Consequential Approach To Accounting For R And D," Journal of Accounting Research, Wiley Blackwell, vol. 5(2), pages 164-172.
    19. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
    20. Lev, Baruch & Sougiannis, Theodore, 1996. "The capitalization, amortization, and value-relevance of R&D," Journal of Accounting and Economics, Elsevier, vol. 21(1), pages 107-138, February.
    21. Fields, Thomas D. & Lys, Thomas Z. & Vincent, Linda, 2001. "Empirical research on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 255-307, September.
    22. Baruch Lev & Bharat Sarath & Theodore Sougiannis, 2005. "R&D Reporting Biases and Their Consequences," Contemporary Accounting Research, John Wiley & Sons, vol. 22(4), pages 977-1026, December.
    23. MacKinlay, A Craig & Richardson, Matthew P, 1991. "Using Generalized Method of Moments to Test Mean-Variance Efficiency," Journal of Finance, American Finance Association, vol. 46(2), pages 511-527, June.
    24. Paul M. Healy & Stewart C. Myers & Christopher D. Howe, 2002. "R&D Accounting and the Tradeoff Between Relevance and Objectivity," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 677-710, June.
    25. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
    26. Martha L. Loudder & Bruce K. Behn, 1995. "Alternative Income Determination Rules and Earnings Usefulness: The Case of R&D Costs," Contemporary Accounting Research, John Wiley & Sons, vol. 12(1), pages 185-205, September.
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    Cited by:

    1. Yasean A. Tahat & Ahmed H. Ahmed & Mohammad M. Alhadab, 2018. "The impact of intangibles on firms’ financial and market performance: UK evidence," Review of Quantitative Finance and Accounting, Springer, vol. 50(4), pages 1147-1168, May.
    2. Gong, James Jianxin & Wang, Sophia I-Ling, 2016. "Changes in the value relevance of research and development expenses after IFRS adoption," Advances in accounting, Elsevier, vol. 35(C), pages 49-61.
    3. Petros Kalantonis & Sotiria Schoina & Spyros Missiakoulis & Constantin Zopounidis, 2020. "The Impact of the Disclosed R & D Expenditure on the Value Relevance of the Accounting Information: Evidence from Greek Listed Firms," Mathematics, MDPI, vol. 8(5), pages 1-18, May.
    4. Tami Dinh & Helen Kang & Wolfgang Schultze, 2016. "Capitalizing Research & Development: Signaling or Earnings Management?," European Accounting Review, Taylor & Francis Journals, vol. 25(2), pages 373-401, June.
    5. Mark Aleksanyan & Khondkar Karim, 2013. "Searching for value relevance of book value and earnings: a case of premium versus discount firms," Review of Quantitative Finance and Accounting, Springer, vol. 41(3), pages 489-511, October.
    6. Namryoung Lee & Jaehong Lee, 2019. "Differentiation Strategy, R&D Intensity, and Sustainability of Accounting Earnings: With a Focus on Biotech Firms," Sustainability, MDPI, vol. 11(7), pages 1-16, March.
    7. Pervaiz Alam & Min Liu & Xiaofeng Peng, 2014. "R&D expenditures and implied equity risk premiums," Review of Quantitative Finance and Accounting, Springer, vol. 43(3), pages 441-462, October.
    8. Hayoung Park & Taewon Kang & Jeong-Dong Lee, 2019. "R&D Dynamics And Firm Growth: The Importance Of R&D Persistency In The Economic Crisis," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 23(05), pages 1-24, June.
    9. Shah, Syed Zulfiqar Ali & Liang, Shuang & Akbar, Saeed, 2013. "International Financial Reporting Standards and the value relevance of R&D expenditures: Pre and post IFRS analysis," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 158-169.
    10. Mustafa Ciftci & Nan Zhou, 2016. "Capitalizing R&D expenses versus disclosing intangible information," Review of Quantitative Finance and Accounting, Springer, vol. 46(3), pages 661-689, April.

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    More about this item

    Keywords

    Accounting for R&D; Capitalization of R&D; Future returns; Accounting methods; Australian GAAP; Resource-based view; G12; G14;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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