An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Gary Kleinman
Robert Morris University

Chen - Lung Chin
National Chengchi University

Picheng Lee
Pace University

Pei - Yu Chen
National Chang - Hua University

Abstract: Innovation capital are typically expensed and/or unrecognized as assets under current generally accepted accounting principles, resulting in accounting-related information asymmetry. This paper examines the association of innovation capital ( measured by R&D expenditures and granted patents) and initial public offering (IPO) anomalies, based on a signaling model. These anomalies include initial IPO underpricing, duration of honeymoon (a distinct feature of the Taiwanese IPO environment), and long-term performance. More innovative firms were more likely to be underpriced, have longer honeymoon periods and have positive and growing long-term market-adjusted returns. This stands in contrast to the declining long-term stock performance of initial public offering firms that is evidenced in the literature.

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