軟體業研發資本化與研發過度投資之關聯性:論管理者權益薪酬之影響

Translated title of the contribution: Relationship between R&D Capitalization and R&D Overinvestment in the Software Industry: The Effect of Executive Equity-Based Compensation

Chia Hui Chen, Liu Ching Tsai, Chaur-Shiuh Young, Hui Wen Hsu

Research output: Contribution to journalArticle

Abstract

Prior studies show that immediate expensing of R&D expenditures creates R&D underinvestment problems. In contrast, from data on firms listed in the U.S. software industry for 2001 to 2011, we provide evidence that R&D capitalization is positively associated with R&D overinvestment. This evidence sheds light on one kind of agency problem- R&D overinvestment- caused by R&D capitalization decisions and, in turn, provides implications for investors and regulators in assessing the consequences of R&D capitalization. Moreover, we examine the effect of executive equity-based compensation on mitigating such agency problem. Our results support that executive equity-based compensation serves as an important mechanism to alleviate R&D overinvestment problems driven by R&D capitalization. This evidence is of value to firms' compensation committees in designing executive compensation structures to motivate managers' R&D investment decisions from long-term perspectives. We finally conduct additional tests to ensure that our empirical results are robust to potential endogeneity concerns and competing explanations.

Original languageChinese
Pages (from-to)1-37
Number of pages37
JournalJournal of Accounting Review
Issue number68
DOIs
Publication statusPublished - 2019 Jan 1

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Equity
Capitalization
Overinvestment
Software industry
Agency problems
Investors
Compensation committees
Investment decision
Endogeneity
Empirical results
Underinvestment
Compensation structure
Executive compensation
Managers
R&D expenditure

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)

Cite this

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abstract = "Prior studies show that immediate expensing of R&D expenditures creates R&D underinvestment problems. In contrast, from data on firms listed in the U.S. software industry for 2001 to 2011, we provide evidence that R&D capitalization is positively associated with R&D overinvestment. This evidence sheds light on one kind of agency problem- R&D overinvestment- caused by R&D capitalization decisions and, in turn, provides implications for investors and regulators in assessing the consequences of R&D capitalization. Moreover, we examine the effect of executive equity-based compensation on mitigating such agency problem. Our results support that executive equity-based compensation serves as an important mechanism to alleviate R&D overinvestment problems driven by R&D capitalization. This evidence is of value to firms' compensation committees in designing executive compensation structures to motivate managers' R&D investment decisions from long-term perspectives. We finally conduct additional tests to ensure that our empirical results are robust to potential endogeneity concerns and competing explanations.",
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軟體業研發資本化與研發過度投資之關聯性:論管理者權益薪酬之影響. / Chen, Chia Hui; Tsai, Liu Ching; Young, Chaur-Shiuh; Hsu, Hui Wen.

In: Journal of Accounting Review, No. 68, 01.01.2019, p. 1-37.

Research output: Contribution to journalArticle

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