R&D Expenditure and Earnings Targets
AbstractThis paper examines whether firms cut R&D spending in response to short-term earnings pressures and how equity markets interpret such behaviour. Failure to report positive earnings and earnings growth increases the probability of a subsequent cut in R&D spending, while pressure to report positive earnings and earnings growth in the current period leads to contemporaneous cuts in R&D investment. On average, investors place less weight on earnings increases accompanied by unexpected cuts in R&D spending. However, the magnitude of the valuation discount varies according to the perceived reason for the cut and the importance of R&D investment as a driver of firm value.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal European Accounting Review.
Volume (Year): 18 (2009)
Issue (Month): 1 ()
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Web page: http://www.tandfonline.com/REAR20
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- Guillaume Dumas, 2012. "Le Comportement Myopique D'Investissement En R&D : Une Realite En France ?," Post-Print hal-00690955, HAL.
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