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The purpose of this paper is to investigate how different research and development (R&D) accounting choice (capitalization and expensing) affects the value of the listed companies under the new Chinese Accounting Standards (CAS) background. According to new CAS, R&D expenditure can either be expensed as incurred as a whole or partly capitalized and partly expensed from 2007.

The paper takes the form of an empirical study using a hand-collected sample of 3,664 observations from Chinese listed companies over 2007–2012 timeframe.

It is found that different methods of reporting R&D investments do affect the value of listed firms in China. Specifically, the firms that chose to capitalize their R&D investments have higher stock price and return. On the contrary, the companies that select to expense their R&D expenditures have lower stock price and return. It is also found that capitalized R&D investments are positively connected to stock price, while expensed R&D expenditures are negatively related to stock prices.

This paper researches and finds the value relevance of R&D capitalization and expensing from the accounting report method itself. This explores some interesting research questions. Does choice of accounting method for R&D expenditure affect firm valuation? Do different methods of reporting R&D investments transfer different signal to investors? Does expensed R&D carry a negative signal to investors? So it can expand the existing R&D area of research.

This paper can provide empirical evidence and decision support for corporate managers, R&D policy makers and investors in a non-mandatory disclosure market of R&D expenditure. Because different R&D accounting choice has different market reactions, managers can choose a favorable method of reporting R&D investments to raise their firm’s stock price. Policy makers should standardize accounting treatment of R&D expenditure, strengthen the disclosure of R&D information and develop a detailed, workable R&D capitalization accounting policies and procedures. Investors can make the right judgment and decision on business innovation capability and future development only by getting more R&D investment information.

Different from present studies focusing on the value relevance of R&D investment, this paper explores an interesting topic showing how different methods of reporting R&D investment in China affect the value of the firms.

Fundamental shifting of the world toward intangible intensive economy raised an apprehension regarding value relevance of internally generated intangible assets. In the previous studies, research and development (R&D) expenditure is recognized as a significant accounting item, which can indicate potential internally generated intangible assets. This study aims to examine whether investors consider nature of intangible intensity of a firm for the evaluation of R&D expenditure to determine equity values in India.

The authors compared value relevance of capitalized and the expensed portion of R&D expenditure between intangible- and non-intangible-intensive firms. They adopted empirical model grounded on the generalized version of Ohlson’s (1995) model.

The findings of the study indicate that, in intangible-intensive (non-intangible) firms, the capitalized portion of expenditure is positively (negatively) significant and the expensed portion of R&D expenditure is negatively (positively) significant to explain equity values.

The findings of this study may have potential implication for the discussion on the accounting treatment of internally generated intangible assets based on the nature of intangible intensity of the firm. The study also suggests that while setting standards, standard-setters should consider nature of intangible intensity of the firm, which could disseminate the discrepancy between the market and book value of the equity.

The study provides evidence, how value relevance of R&D reporting is affected by the nature of intangible intensity of a firm.

China adopted its new Accounting Standards for Business Enterprises No. 6 in 2007, which substantially converges with the International Financial Reporting Standards. It stipulates that firms operating in China shall capitalize development costs provided specific criteria have been met. This paper aims to examine the effects of the new accounting policies of R&D on the value-relevance and stock performance of 36,299 Chinese firms-years from 2007 to 2020.

A comprehensive multi-stage analysis was conducted. Multiple linear regressions were performed on the pooled cross-sectional time-series total R&D, capitalized expenditures, expensed costs and other key financial factors to test for the effects of R&D on the stock prices, contemporaneous stock returns and subsequent stock returns for the full sample, capitalizer sample and expenser sample, respectively.

First, majority of Chinese firms (about 80% of those reported) elect to adopt expensing R&D approach, while about 20% deploys capitalization treatment. Second, key attributes such as size, profitability, leverage and R&D intensity are highly associated with capitalization propensity. Third, current capitalization affects the contemporaneous stock prices and stock returns (priced-in) with yearly volatility. Finally, intertemporal association exists between firms’ expensing costs and subsequent returns due to a delayed reaction.

As the world largest emerging economy, the results show that research and development information adds value, and capitalizers outperforms expensers in the area of stock performance. This strategy works irrespectively of economic development stage or capital market maturity. The findings call for more capitalization.

The knowledge- and Internet-based economy demands a reexamination of the accounting treatment for intangibles and a thorough understanding of the empirical evidence on this topic.

The study reviews the literature on research and development (R&D), a specific internally developed intangible asset, using meta-analysis techniques that allow to highlight the areas of consensus and disagreement in quantitative empirical results. The literature the authors review addresses four main research questions on (1) the determinants of the decision to capitalize R&D, (2) stock market-based outcomes of capitalizing R&D, (3) firm-based outcomes related to expensing R&D and (4) stock market-based outcomes of expensing R&D.

The authors find higher value relevance of capitalized compared with expensed R&D. There is, however, little robust evidence on the determinants of the capitalization decision and the characteristics of capitalizers.

The authors conclude by highlighting future research that can allow accounting academics to contribute to standard setting.

This paper aims to examine the impact of the intangible intensity of the firm on the relevance of research and development (R&D) information to determine equity values in India. Additionally, the study compares the association of input information on R&D investment (the reported R&D cost) and output information on R&D investment (patent count) with equity values. Further, the study also examines the operational nature of the firm and patent count, which is the better proxy to measure the intangible intensity of the firm.

The authors compared the explanatory power of R&D information between intangible and non-intangible intensive firms. To estimate the value relevance of R&D information, the authors followed the statistical model based on the theoretical framework of the residual income model.

The results indicate that there is a significant moderating impact of the intangible intensity of the firm on the relevance of R&D information to determine equity values in India over the 25 years study period (from 1991 to 2016). Further, in India, the study finds that the input information of R&D outlay is more relevant than output information on R&D outlay to determine equity values, irrespective of the proxy measure of intangible intensity. Moreover, the study finds that the operational nature of the firm is a better proxy of the intangible intensity of the firm compared to patent counts.

In this study, pooled cross-sectional data were used for analysis. In the future, longitudinal and panel data can be used for more insightful results.

The findings of the study provide direction to investors and creditors to find the intrinsic value of the investments in internally developed intangible assets, which will reduce the asymmetry between the market value and accounting value of equity.

The paper offers insights into the impact of intangible intensity on the relevance quality of R&D information in an emerging country.

This study aims to investigate how the intangible intensive nature of firms affects the value relevance of earnings and the book value of equity between profit- and loss-reporting firms. The study also examines how firms’ intangible intensity affects the value relevance of R&D outlays between profit- and loss-reporting firms.

An empirical analysis based on Ohlson’s (1995) framework is used. A total of 54,421 firm-year observations of Indian listed firms from financial years 1992–2016 constitute the study sample.

The findings suggest that the difference in the value relevance of earnings and the book value of equity between profit- and loss-reporting firms is more significant in non-intangible intensive firms than in intangible firms. Specifically, earnings are more value relevant in profit-reporting and non-intangible intensive firms, whereas book value of equity is more value relevant in loss-reporting and intangible intensive firms. The results also suggest that the difference in the incremental value relevance of R&D information between profit- and loss-making firms is higher in intangible intensive firms than in non-intangible intensive firms.

The findings of this study can help managers, standard-setters and investors make effective decisions.

This study offers insights into the impact of intangible intensity on the value relevance of aggregated and disaggregated accounting information between profit- and loss-making firms in institutional settings where capitalization of R&D expenditures is allowed.

The purpose of this paper is to investigate the incidence of International Financial Reporting Standard (IFRS) on stock market assessment of intangibles and voluntary disclosure about innovation.

The authors develop three regression models. The first model investigates the stock market valuation of intangible assets and disclosure about innovation. The second model desegregates earnings to assess the relevance of components related to intangibles. The third model investigates how intangible expenses and voluntary disclosure affect analysts forecast dispersion.

Results show that the value relevance of intangible assets and expenses improves with the adoption of IAS 38. Overall, results indicate a decrease in the value relevance of voluntary disclosure about innovation under IFRS. More specifically, results suggest some overlap in the information content of mandated and voluntary disclosure for stock market valuation of intangible assets under IFRS. Findings also suggest that voluntary disclosure moderates market's assessment of expensed intangibles under both Canadian GAAP and IFRS.

IAS 38 requires entities to recognize an intangible asset if certain criteria are met and to disclose specific information about it. In such a context, market participants may refer to a greater extent to financial reporting and to a lesser extent to voluntary disclosure when valuating intangibles.

Managers will have an incentive to better target their communications to ensure a degree of complementarity with financial reporting. In this sense, this study contributes to the voluntary disclosure literature.

To the best of the authors' knowledge, this is the first study to investigate the relationship between mandatory disclosure and voluntary disclosure about intangibles and evaluate the impact of IFRS on this matter.

The purpose of this paper is to assess the financial disclosure vis‐á‐vis economic reality of research and development (R&D) expensed by Australian firms under the pre‐2005 Australian generally accepted accounting principles (A‐GAAP) regime via the lens of market‐to‐book.

The authors estimated firms' R&D profit rate, measured R&D revenue intensity and modelled the impacts of these and related economic factors, via economic and financial disclosure channels, on market‐to‐book using data for 1988‐2004.

R&D, on average, was profit neutral and had undetectable impacts on market‐to‐book whether via equity valuation or financial disclosure.

Market‐to‐book's information content is best viewed as conditional on the reference disclosure regime. Australian firms' typically at best minimal R&D profitability is an international anomaly. Data limitations in terms of the generating process and availability mean that R&D's impact on market‐to‐book via financial reporting is not definitively determined.

Restrictive rules on the capitalization of intangible asset‐related expenditures under A‐GAAP apparently did not adversely impact market‐to‐book's economic information. AIFRS's more permissive rule risks compromising market‐to‐book's reliability in such a role.

For Australia, the paper is anticipated to be the first to estimate the profit rate of R&D, measure the intensity of R&D, and model R&D's influence on the market‐to‐book ratio. It develops a framework for the economic and financial reporting impacts of investments on a key indicator of firms' financial standing and contributes to the debate on identifiable intangibles' disclosure.

This study aims to shed light on driving factors of research and development (R&D) investments by considering financial statement-based characteristics, audit quality, and Schumpeterian variables. This study distinguishes between capitalized R&D investments and expensed R&D investments by taking different accounting treatments into account. Based on a sample of listed manufacturing firms on Borsa Istanbul over 2013–2018, this study concludes that (i) competition (size) decreases (increases) R&D investments, (ii) big4 auditors pay more attention to the proper accounting treatment of R&D investments, (iii) internal financing does not affect R&D investments, and (iv) liquidity (leverage and marketing expenditures) plays a positive (negative) role in only capitalized R&D investments.

This study aims to investigate whether research and development (R & D) expenditures drive future innovation in the chemical industry.

This study examines the relation between R & D expenditures for the period of 2000-2002 and the innovation effect measured by the Malmquist Productivity Index (MPI) for the period of 2003-2005. Under the MPI, the innovation effect is measured as the “shift” in a firm’s production frontier between two periods (2003-2005).

Results indicate that there is a significant and positive relation between R & D expenditures and future innovation among chemical firms.

This study should be of interest to financial accounting policy makers, R & D-intensive companies and investors. To policy makers, they may consider the possibility of permitting R & D-intensive companies to recognize R & D expenditures as assets. In other words, R & D-intensive companies can capitalize and amortize their R & D expenditures, as R & D expenditures can bring them future economic benefits. To R & D-intensive companies, the results may encourage them to keep up their R & D activities. Moreover, this study can increase individual investors’ confidence in investing companies with high-level R & D activities in an R & D-intense industry.