Accounting Comparability and Corporate Innovative Efficiency

Chircop, Justin and Collins, Daniel and Hass, Lars Helge and Nguyen, Nhat (2020) Accounting Comparability and Corporate Innovative Efficiency. The Accounting Review, 95 (4). 127–151. ISSN 0001-4826

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Abstract

We predict that a firm's greater accounting comparability with its industry peers facilitates its learning from those peer firms' research and development (R&D) investments, allowing that firm to have greater innovative efficiency. We estimate accounting comparability using pro-forma capitalized R&D earnings that link lagged R&D expenditures to future profitability employing the Almon (1965) distributed lag model. We find that greater accounting comparability leads to enhanced ability to predict future cash flows generated by R&D investments of peer firms. In the cross-section, we observe the relation between accounting comparability and innovative efficiency is stronger if peer firms exhibit higher accounting (accrual) quality and are themselves successful innovators. In sum, this study shows that a shared qualitative characteristic of accounting, namely accounting comparability, is positively associated with innovative efficiency.

Item Type:
Journal Article
Journal or Publication Title:
The Accounting Review
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1400/1402
Subjects:
ID Code:
136917
Deposited By:
Deposited On:
24 Sep 2019 10:35
Refereed?:
Yes
Published?:
Published
Last Modified:
17 Aug 2020 08:15