The impact of value-relevant accounting rules on innovative activities

Hsuan Chu Lin, Chin Chen Chien, She Chih Chiu

Research output: Contribution to journalArticle

3 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)872-886
Number of pages15
JournalR and D Management
Volume46
Issue number5
DOIs
Publication statusPublished - 2016 Nov 1

Fingerprint

Industry
Shareholders
Intellectual property
Managers
Innovative activity
Compensation and Redress
Innovative potential
Risk premium
Assets
Incentives
Asymmetry of information
Funding
Accounting information

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation

Cite this

Lin, Hsuan Chu ; Chien, Chin Chen ; Chiu, She Chih. / The impact of value-relevant accounting rules on innovative activities. In: R and D Management. 2016 ; Vol. 46, No. 5. pp. 872-886.
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The impact of value-relevant accounting rules on innovative activities. / Lin, Hsuan Chu; Chien, Chin Chen; Chiu, She Chih.

In: R and D Management, Vol. 46, No. 5, 01.11.2016, p. 872-886.

Research output: Contribution to journalArticle

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