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 |
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All Science Journal Classification (ASJC) codes
- Business and International Management
- Business, Management and Accounting(all)
- Strategy and Management
- Management of Technology and Innovation
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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 journal › Article
TY - JOUR
T1 - The impact of value-relevant accounting rules on innovative activities
AU - Lin, Hsuan Chu
AU - Chien, Chin Chen
AU - Chiu, She Chih
PY - 2016/11/1
Y1 - 2016/11/1
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=84930362033&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84930362033&partnerID=8YFLogxK
U2 - 10.1111/radm.12143
DO - 10.1111/radm.12143
M3 - Article
AN - SCOPUS:84930362033
VL - 46
SP - 872
EP - 886
JO - R and D Management
JF - R and D Management
SN - 0033-6807
IS - 5
ER -