Please use this identifier to cite or link to this item: https://doi.org/10.1007/s11156-007-0023-1
Title: The relation between R&D intensity and future market returns: Does expensing versus capitalization matter?
Authors: Chan, H.W.H.
Faff, R.W.
Gharghori, P.
Ho, Y.K. 
Keywords: Accounting for R&D
Accounting methods
Australian GAAP
Capitalization of R&D
Future returns
Resource-based view
Issue Date: 2007
Source: Chan, H.W.H.,Faff, R.W.,Gharghori, P.,Ho, Y.K. (2007). The relation between R&D intensity and future market returns: Does expensing versus capitalization matter?. Review of Quantitative Finance and Accounting 29 (1) : 25-51. ScholarBank@NUS Repository. https://doi.org/10.1007/s11156-007-0023-1
Abstract: The Australian accounting environment provides an ideal setting for examining the impact of different accounting treatments of firms' R&D activities on their subsequent returns. Unlike US firms, which can only expense R&D, Australian GAAP permits firms to either expense or capitalize their R&D expenditure. We examine separately the market impact of the R&D intensity of all R&D active firms, 'capitalizers' and 'expensers'. Our results suggest that firms with higher R&D intensity perform better, regardless of the accounting method used, consistent with the resource-based view of the firm. We also find some evidence that firms which expense R&D outperform those which capitalize R&D after controlling for R&D intensity. © 2007 Springer Science+Business Media, LLC.
Source Title: Review of Quantitative Finance and Accounting
URI: http://scholarbank.nus.edu.sg/handle/10635/44461
ISSN: 0924865X
DOI: 10.1007/s11156-007-0023-1
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