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R&D expenditures and earnings targets

Young, S E and Garcia, B (2009) R&D expenditures and earnings targets. European Accounting Review, 18 (1). pp. 7-32. ISSN 0963-8180

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    This paper examines whether firms cut R&D spending in response to short-term earnings pressures and how equity markets interpret such behaviour. Failure to report positive earnings and earnings growth increases the probability of a subsequent cut in R&D spending, while pressure to report positive earnings and earnings growth in the current period leads to contemporaneous cuts in R&D investment. On average, investors place less weight on earnings increases accompanied by unexpected cuts in R&D spending. However, the magnitude of the valuation discount varies according to the perceived reason for the cut and the importance of R&D investment as a driver of firm value.

    Item Type: Journal Article
    Journal or Publication Title: European Accounting Review
    Departments: Lancaster University Management School > Accounting & Finance
    ID Code: 45473
    Deposited By: ep_importer_pure
    Deposited On: 11 Jul 2011 19:32
    Refereed?: Yes
    Published?: Published
    Last Modified: 14 Apr 2018 00:11
    Identification Number:

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