Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The Association of R&D and Capital Expenditures with Subsequent Earnings Variability

The Association of R&D and Capital Expenditures with Subsequent Earnings Variability Abstract: We estimate the association of investments in R&D and in physical assets (CAPEX) with subsequent earnings variability. We estimate these relations in different time periods and across industries. We find that R&D contributes to subsequent earnings variability more than CAPEX only in relative R&D‐intensive industries – industries in which R&D is relatively more intensive than physical capital. In physical assets‐intensive industries, we do not find similar relations. The findings suggest that with respect to subsequent earnings variability, fundamental differences between investment information about R&D and CAPEX exist. However, they are mainly noticeable in firms that operate in relatively R&D‐intensive industries. The evidence also suggests there was a shift in the relations between R&D and CAPEX over time. Our findings contribute to the debate on accounting for R&D expenditures. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Finance & Accounting Wiley

The Association of R&D and Capital Expenditures with Subsequent Earnings Variability

Download PDF
25 pages

Loading next page...
 
/lp/wiley/the-association-of-r-d-and-capital-expenditures-with-subsequent-dMPNSOMzal

References (48)

Publisher
Wiley
Copyright
Copyright © 2007 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0306-686X
eISSN
1468-5957
DOI
10.1111/j.1468-5957.2006.00651.x
Publisher site
See Article on Publisher Site

Abstract

Abstract: We estimate the association of investments in R&D and in physical assets (CAPEX) with subsequent earnings variability. We estimate these relations in different time periods and across industries. We find that R&D contributes to subsequent earnings variability more than CAPEX only in relative R&D‐intensive industries – industries in which R&D is relatively more intensive than physical capital. In physical assets‐intensive industries, we do not find similar relations. The findings suggest that with respect to subsequent earnings variability, fundamental differences between investment information about R&D and CAPEX exist. However, they are mainly noticeable in firms that operate in relatively R&D‐intensive industries. The evidence also suggests there was a shift in the relations between R&D and CAPEX over time. Our findings contribute to the debate on accounting for R&D expenditures.

Journal

Journal of Business Finance & Accounting – Wiley

Published: Jan 1, 2007

There are no references for this article.