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

[img]
Preview
PDF (R&D expenditures and earnings targets)
10.pdf - Submitted Version

Download (219kB)

Abstract

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: /dk/atira/pure/subjectarea/aacsb/disciplinebasedresearch
Subjects:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 45473
Deposited By: ep_importer_pure
Deposited On: 11 Jul 2011 18:32
Refereed?: Yes
Published?: Published
Last Modified: 18 Jul 2019 00:22
URI: https://eprints.lancs.ac.uk/id/eprint/45473

Actions (login required)

View Item View Item