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Corporate social responsibility (CSR) index represents attributes of firms that are differentiated. The purpose of this paper is to investigate the impacts of differentiated CSR, CSRS (strategic CSR activities) and CSRD (defensive CSR activities) on R&D expenditure and its effectiveness on firm values.

The sample includes 1,388 firm-year observations for 2004–2015 of listed firms on the Korean Stock Exchange (KSE) whose CSR measures, KEJI (Korea Economic Justice Institute) index are available from the Citizens' Coalition for Economic Justice (2016).

The results show that while CSRS is positively associated with R&D expenditure, CSRD is not. Further, development costs and its interaction term with CSRS positively affect firm values.

This study provides an important reason to separate the attributes of the CSR in future empirical studies. The results imply that the study of effects of CSR on sustainable growth or firm values should focus on CSRS rather than CSR activities in general in future research.

This study aims to explore the influence of corporate taxation on the performance of innovative companies under various research and development (R&D) tax incentive programs.

The empirical model is based on the data of 520 companies for period 2007-2016. This model includes return on assets as the main proxy for performance and effective tax rate as a main explanatory variable. Controlling for other known determinants, the authors divide the sample into the subsamples to control for the various R&D tax incentive programs. The fact that the model includes the lagged explanatory variable of performance the Blundell –Bond model was applied.

The authors found evidence that corporate taxation has a significant impact on performance, but the direction could be ambiguous. Impact of the corporate tax rate on performance in general sample is significantly negative, which is consistent with results obtained by authors for the non-innovative companies. However, for further examination, the authors use subsamples of companies with different R&D tax incentive programs. The effect of corporate tax becomes positive under the patent box program only. Moreover, under various R&D tax incentive program, the impact of main control variables has changed. Therefore, the authors conclude that not only corporate taxation but also R&D tax incentive programs significantly influence the performance of innovative companies.

The data are limited due to fragmented information disclosure about the R&D tax incentive program used. Thus, a different data set might reveal new information and correlation between variable on the same topic. Moreover, the authors do not cover all R&D tax incentive programs, which are specified for companies and countries. However, the study fills the gap between corporate taxation, performance and innovative companies. As the significant result was found the further research is important. The study contributes not only in the field of research but also a practical one. The choice of R&D tax incentive program influences main indicators of companies’ performance so it may change the behavior of the investors and decision-making managers of the companies.

Given the increasing interest in the topic of innovative companies, this study fills the gap between corporate taxation in innovative companies and performance. In addition, the importance of R&D tax incentive programs as a feature of innovative companies was found.

This paper seeks to address the value relevance of summary accounting measures and fundamental income statement variables in the market valuation of biotech firms.

A biotech firm's stock price was related to its underlying financial accounting variables. Using the Ohlson model, the linear function of book value and earnings was employed, and the basic model was augmented with additional accounting variables. These accounting variables may provide information relevant for forming an approximation on the present value of expected future abnormal earnings.

Results show non‐linearities in the pricing of accounting variables Both book value and earnings are value relevant, but positive earnings are positively priced while negative earnings are negatively priced. R&D spending and selling, general and administrative expenses are also priced as assets for loss‐reporting firms, and as expenses for profit‐reporting observations. Including analysts’ forecasts of future earnings and long‐term growth rate in the model results in an insignificant increase in the explanatory power of the regressions.

Future research could attempt to examine the role of non‐financial variables which can proxy for the soft variables and intangibles like strategic alliances and product pipeline. Decomposing revenue into product sales, interest income and collaborative research revenue may further enhance our understanding on the determinants of the market value of biotech stocks.

This paper provides insights into the valuation of biotechnology stocks. Results show non‐linearities in the pricing of summary accounting measures and fundamental income statement variables.

The purpose of this paper is to investigate the determinants and persistence of research and development (R&D) investments in Malaysia.

The approach involves a regression analysis.

The regression analysis shows that lagged absorbed slack defined as the ratio of selling and administrative expenses to total sales and sales growth have positive affect on the R&D expenses, whereas diversification has negative impact on R&D expenses after controlling for leverage and profitability of the firms. Persistence in the firm‐level R&D expenses is found. Occasional tendency among firms to cut down R&D spending over the period of 2000‐2005 is found.

Sample size is a limitation.

The findings have implications for the corporate governance and innovation charter of the firms.

The paper provides useful information from Malaysia regarding the determinants and persistence of R&D investments.

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 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.

This study aims to examine whether auditors who specialize in research and development (R&D) activities help reduce managers’ opportunistic adjustment of R&D expenditure for real earnings management (REM).

Using a sample of US firms during the 2001–2017 period, the authors identify auditors’ R&D specialization as their prior experience of auditing R&D expenses spent by each client’s peers. The authors measure R&D-based REM as the negative deviation from the predicted level of R&D expenditure.

The authors find that clients of R&D specialist auditors are less likely to engage in REM through a discretionary reduction of R&D expenditure. This effect is more pronounced when clients face higher competition, have larger investment opportunities and entail higher audit risks.

This study shows that auditors’ specialized knowledge can facilitate stronger monitoring of clients’ real decisions, providing implications for auditors’ knowledge acquisition and transfer in specific types of transactions.

This study contributes to the literature by documenting the governance role played by R&D specialist auditors in clients’ real economic decisions. Moreover, the study identifies R&D as a distinct area of auditor specialization.

Prior studies generally focus on income smoothing through discretionary accruals and document that managers have incentives to smooth earnings due to various reasons. This paper aims to focus on income smoothing through research and development (R&D) management and examine whether and how income smoothing through R&D management affects credit rating agencies’ perception of firm risk.

The authors use financial statement data from the CRSP/Compustat Merged data set universe for the period from 1992 to 2019 after excluding financial and utility industries. The authors follow the model for credit ratings used in previous literature to test the hypothesis. Specifically, the authors use an ordered probit model to express credit ratings as a function of income smoothing attributes.

The authors find that R&D-based income smoothing improves a firm’s credit rating. However, the positive effect of R&D-based income smoothing on credit ratings is less than that of accruals-based income smoothing. This study also shows that the positive effect of R&D-based income smoothing is more pronounced for firms less subject to opportunistic incentives, further strengthening the notion that managers smooth earnings through R&D management to provide more informative earnings.

This study contributes to the income smoothing literature in several ways. First, the authors contribute to the research by showing that managers’ income smoothing activity through R&D management positively affects firms’ credit rating. Second, the authors also document the relative benefits of the two different income smoothing techniques in terms of improving credit agencies’ perception of firms’ creditworthiness.

In times of crisis, innovation management and specifically Research and Development (R&D) investments are critical to temper company losses and stimulate higher revenues. Environmental policies, for their potential to stimulate environmental innovations and efficient management of resources, may hold a magnifying role in this relationship. By relying on the distinction between regulatory policies and institutional incentives, this paper argues about the moderating role of environmental policies between a firm's R&D expenses and its performance.

Hypotheses are tested on data collected from a sample of small and medium-sized Chinese enterprises after the 2008 financial crisis.

Findings reveal positive moderating effects of both regulatory pressures and institutional incentives, with a more significant effect of government support. The highest impact is reached when both these types of policies are present.

The theoretical and methodological relevance of this distinction, the importance of an appropriate mix of environmental policies in policymaking and their resilience building role in stimulating environmental innovations in the aftermath of crises are discussed.

This study aims to examine the use of real activities manipulation by firms implicated in the stock option backdating scandal.

The real activity manipulation measures are as follows: abnormal R&D expense, abnormal SG&A expense, abnormal production cost and abnormal cash flow from operations. Using a sample of firms alleged to have backdated options during the period 1998-2006 and non-backdating one-on-one matched firms, a separate regression is run for each of the real activity manipulation measures (dependent variables) on backdating and other variables.

The authors report unusually low R&D and unusually low SG&A expenses among the backdating firms. They also find evidence of unusually high production costs among backdating firms compared to the matched firms.

The findings imply that backdating firms are more aggressive in the use of real activities to manipulate earnings and the use of real activities appears to be opportunistic.

The study contributes to the literature by providing evidence of the use of real activities manipulation by firms under investigation for fraud. The authors also add to the debate on whether the use of stock options as part of compensation aligns the interest of management with the interest of shareholders.