The value relevance of management’s research and development reporting choice: Evidence from Australia

R&D capitalization and audit fees: Evidence from China

“…Consistent with the signaling argument, Abrahams and Sidhu (1998); Ahmed and Falk (2006), and Ang, Church, and Feng (2008) researched Australian firms and found that capitalized R&D expenditures are value-relevant to investors. Wyatt (2005), further supports such findings, noting that, in Australia, the capitalization of intangible assets primarily reflects underlying economic conditions.…”

“…11 Previous research in favor of R&D capitalization typically explores English-legal-origin countries such as the United States (e.g., Healy et al, 2002;Krishnan & Wang, 2014), the U.K. (e.g., Green et al, 1996;Oswald & Zarowin, 2007a), or Australia (e.g., Abrahams & Sidhu, 1998;Ahmed & Falk, 2006;Ang et al, 2008;Wyatt, 2005) that feature strong legal enforcement. In contrast, research that finds unfavorable motivations and consequences of R&D capitalization is done in countries with weak legal environments, such as Italy or France (Markarian et al, 2008;Cazavan-Jeny & Jeanjean, 2006;Cazavan-Jeny et al, 2011).…”

The value relevance of R&D across profit and loss firms

“…It follows that the pricing multiplier on 13 We thank the reviewer for highlighting this intuition. 14 In reporting regimes where a choice between capitalizing and expensing R&D is allowed such as for firms traded on the Australian exchange (Ahmed and Falk (2006)) and firms following IFRS 38, this framework can be extended to examine the value relevance of capitalization versus expensing.…”

Capitalizing Research & Development: Signaling or Earnings Management?

“…In some settings, capitalizing R&D has been found to be informative (e.g. Ahmed & Falk, 2006 under Australian generally accepted accounting principles (GAAP); Oswald & Zarowin, 2007 under UK GAAP). In other settings, research has found evidence that the discretion involved in R&D capitalization can be used for opportunistic earnings management, resulting in capitalization being uninformative (Cazavan-Jeny & Jeanjean, 2006;.…”