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 language | English |
|---|---|
| Pages (from-to) | 872-886 |
| Number of pages | 15 |
| Journal | R and D Management |
| Volume | 46 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - 2016 Nov 1 |
All Science Journal Classification (ASJC) codes
- Business and International Management
- Business, Management and Accounting(all)
- Strategy and Management
- Management of Technology and Innovation