Review of Accounting Studies, 7, 159–162, 2002 C 2002 Kluwer Academic Publishers. Manufactured in The Netherlands. Discussion of “Excess Returns to R&D-Intensive Firms” XIAO-JUN ZHANG Haas School of Business, University of California at Berkeley A key feature of the accounting treatment for research and development outlays is that these costs are completely expensed when incurred. This is in sharp contrast to the accounting methods that are prescribed for other types of investments under US GAAP. Practition- ers, rule makers, and academics have debated for decades as to whether intangible assets generated from R&D activities should be recognized, and if so, how they should be val- ued. Since these questions encompass fundamental aspects of asset valuation, a stream of accounting research which focuses on R&D intensive ﬁrms has developed. Earlier works such as Dukes, Dyckman and EIlliott (1980) examine how such accounting affects ﬁrms’ investment decisions. Recent papers in this area have extended their focus to how R&D accounting affects the valuation of R&D intensive ﬁrms. Lev and Sougiannis (1996) and Chan, Lakonishok and Sougiannis (2000) both document signiﬁcant excess market returns associated with R&D intensive ﬁrms. However, the authors provide alternative interpretations for the presence of excess returns. Lev
Review of Accounting Studies – Springer Journals
Published: Oct 21, 2004
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