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
Uncontrolled Keywords:
?? accountingdiscipline-based research ??
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Deposited On:
11 Jul 2011 18:32
Last Modified:
31 Dec 2023 00:22