On R&D Capitalization and Value Relevance

In this paper, we respond to the critique of our article (Boone and Raman, 2001) by Ronen (2001). Our position is that Ronen s (2001) criticisms are not well-founded and that our study extends prior research by providing additional evidence about the ex post effects of Statement of Financial Accounting Standards (SFAS) No. 2 (Financial Accounting Standards Board (FASB), 1974, para. 12). Specifically, our study provides evidence consistent with the notion that the extant accounting and reporting for research and development (R&D) spending exacerbates information asymmetry