R&D Expenditure and Earnings Targets
This paper examines whether firms cut R&D spending in response to short-term earnings pressures and how equity markets interpret such behaviour. Failure to report positive earnings and earnings growth increases the probability of a subsequent cut in R&D spending, while pressure to report positive earnings and earnings growth in the current period leads to contemporaneous cuts in R&D investment. On average, investors place less weight on earnings increases accompanied by unexpected cuts in R&D spending. However, the magnitude of the valuation discount varies according to the perceived reason for the cut and the importance of R&D investment as a driver of firm value.
Year of publication: |
2009
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Authors: | Osma, Beatriz Garcia ; Young, Steven |
Published in: |
European Accounting Review. - Taylor & Francis Journals, ISSN 0963-8180. - Vol. 18.2009, 1, p. 7-32
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Publisher: |
Taylor & Francis Journals |
Saved in:
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