|
Does Expensing of R&D Expenditures Reduce the Informativeness of Accounting Information: Evidence from Earnings Announcements
Mustafa Ciftci,
University of Manitoba
ABSTRACT. This study investigates how the expensing of R&D expenditures impacts the informativeness of the earnings announcements. Prior research suggests that expensing of R&D distorts the accounting principle of matching revenues with expenses and thus, reduce the informativeness of the accounting information. However, I find that the accounting information is more informative for R&D (high-tech) firms relative to non-R&D (other) firms. I also find that there is positive association between the level of R&D intensity and the informativeness of the earnings announcements. The impact of expensing regime will be substantiated when a firm is in growth stage relative to the case when a firm is in steady state. Consequently, I investigate how a large increase affects the informativeness of the earnings announcements. I find that the informativeness of the earnings announcements for firms with a large increase in R&D intensity is similar to other R&D firms.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|