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Determinants of R&D Value Reporting Bias: An Empirical Study in the EU

In: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Hybrid Conference, Dubrovnik, Croatia, 5-7 September, 2024

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  • Georgiou, Andreas

Abstract

This study investigates the determinants of R&D value reporting bias in technology sector entities from six EU countries, including Germany and France, using data from 188 entities between 2006 and 2023. The research employs a mixed-method approach, including Pearson correlations, mixed model regressions, and binary logistic regressions, to analyse the relationships between financial leverage ratios, earnings per share, and the performance of intangible assets. The findings indicate significant correlations between financial structure metrics and the Net Present Value (NPV) ratios of intangible assets, suggesting that higher debt levels relative to assets enhance the performance of internally generated intangibles, while increased debt-to-equity and debt-to-capital ratios have a negative impact. Additionally, the study reveals the influence of regional factors and auditor rank on financial performance, emphasizing the complex interplay between financial metrics and the valuation of intangible assets. These insights contribute to understanding earnings management behaviours and provide practical implications for financial management in R&D-intensive entities.

Suggested Citation

  • Georgiou, Andreas, 2025. "Determinants of R&D Value Reporting Bias: An Empirical Study in the EU," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2024), Hybrid Conference, Dubrovnik, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Hybrid Conference, Dubrovnik, Croatia, 5-7 September, 2024, pages 506-540, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    • Handle: RePEc:zbw:entr24:317982
    DOI: 10.54820/entrenova-2024-0039
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    References listed on IDEAS

    as
    1. Tami Dinh & Baljit K. Sidhu & Chuan Yu, 2019. "Accounting for Intangibles: Can Capitalization of R&D Improve Investment Efficiency?," Abacus, Accounting Foundation, University of Sydney, vol. 55(1), pages 92-127, March.
    2. Clausen, Saskia & Hirth, Stefan, 2016. "Measuring the value of intangibles," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 110-127.
    3. Laurie Hunter & Elizabeth Webster & Anne Wyatt, 2012. "Accounting for Expenditure on Intangibles," Abacus, Accounting Foundation, University of Sydney, vol. 48(1), pages 104-145, March.
    4. Mustafa Ciftci & Masako Darrough, 2015. "What Explains the Valuation Difference between Intangible-intensive Profit and Loss Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(1-2), pages 138-166, January.
    5. Gatchev, Vladimir A. & Spindt, Paul A. & Tarhan, Vefa, 2009. "How do firms finance their investments?: The relative importance of equity issuance and debt contracting costs," Journal of Corporate Finance, Elsevier, vol. 15(2), pages 179-195, April.
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    More about this item

    Keywords

    intangibles; assets; internally generated; capitalisation; earnings management;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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