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On the Market Reaction to Capitalization of R&D Expenditures: Evidence from ChiNext

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  • Li Kong
  • Huaitao Su

Abstract

Based on 2009–2016 ChiNext data, this paper studies the relation between a company’s R&D expenditure capitalization and its business performance and the external market response to this decision. We find that, the more a company’s R&D expenditure is capitalized, the better its performance will be. In addition, the regression on the short-term market reaction shows that the increment of the development expenditure cannot lead to a direct market response. The regression results on the long-term market performance indicate that the market accepts the lagging of the R&D achievements and anticipates more intangible assets could be converted from these achievements. Overall, our results provide evidence that only the R&D expenditures that really form the intangible assets reflect the value of the capitalization and facilitate the sustainable innovation of ChiNext-listed companies.

Suggested Citation

  • Li Kong & Huaitao Su, 2021. "On the Market Reaction to Capitalization of R&D Expenditures: Evidence from ChiNext," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(5), pages 1300-1311, April.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:5:p:1300-1311
    DOI: 10.1080/1540496X.2019.1668769
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    Cited by:

    1. Ziqin Yu & Xiang Xiao, 2022. "Innovation information disclosure and stock price crash risk‐based supervision and insurance effect path analysis," Australian Economic Papers, Wiley Blackwell, vol. 61(3), pages 534-590, September.

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