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- Title
The impact of value-relevant accounting rules on innovative activities.
- Authors
Lin, Hsuan‐Chu; Chien, Chin‐Chen; Chiu, She‐Chih
- Abstract
The purpose of this paper is to examine the impact of value-relevant accounting rules on corporate innovative activities. Using US data from 1972 to 2012, we find that value-relevant accounting rules help innovative companies to reduce R&D funding gaps, which is conducive to companies' innovative activities and potential long-term benefits. However, a higher risk premium is required by shareholders of innovative companies. Additionally, we find not only that R&D spending is more sensitive to future earnings variability as compared to that occurring commercial intellectual properties and physical assets, but we also find that managers contracted with long-term compensation plans have greater incentives to engage in innovative activities when value-relevant accounting rules set in. Overall, we provide evidence on alleviation of information asymmetry between innovative companies and their lenders when accounting information is more value relevant.
- Subjects
ACCOUNTING; TECHNOLOGICAL innovations; CORPORATE profits; RESEARCH &; development; INTELLECTUAL property
- Publication
R&D Management, 2016, Vol 46, Issue 5, p872
- ISSN
0033-6807
- Publication type
Article
- DOI
10.1111/radm.12143