QUT ePrints

The Role of External Monitoring in Firm Valuation: The Case of R&D Capitalization

Tutticci, Irene, Krishnan, Gopal, & Percy, Majella (2007) The Role of External Monitoring in Firm Valuation: The Case of R&D Capitalization. Journal of International Accounting Research, 6(2), pp. 83-107.

[img] PDF (415kB)
Administrators only

Abstract

We investigate whether the use of a high quality auditor and increased regulatory monitoring of R&D reporting influence both the level of R&D expenditure capitalized by Australian companies from 1992 to 2002 and the market’s perception of the reliability of these figures. The results indicate that firms with a higher quality auditor capitalize lower levels of R&D costs and that in the period following increased regulatory monitoring, firms capitalize fewer R&D costs. Analysis of the value relevance of R&D expenditure indicates that the market positively values R&D costs when expensed as incurred. These results are consistent using both price and returns models. Results are less persistent for capitalized R&D amounts. The finding from the returns model indicates that the quality of the auditor appears to enhance the reliability of capitalized R&D costs while the price model suggests that the cumulative R&D asset is less relevant in the period following ASC monitoring.

Impact and interest:

Citation countsare sourced monthly from Scopus and Web of Science® citation databases.

These databases contain citations from different subsets of available publications and different time periods and thus the citation count from each is usually different. Some works are not in either database and no count is displayed. Scopus includes citations from articles published in 1996 onwards, and Web of Science® generally from 1980 onwards.

Citations counts from the Google Scholar™ indexing service can be viewed at the linked Google Scholar™ search.

ID Code: 7970
Item Type: Journal Article
Additional Information: Access to the author-version is currently restricted pending permission from the publisher. For more information, please refer to the journal’s website (see hypertext link) or contact the author.
Additional URLs:
Keywords: R&D, Research and development expenditure, Audit quality, Valuation, Australia
ISSN: 1558-8025
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100) > International Accounting (150104)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2007 International Accounting Section of the American Accounting Association
Deposited On: 10 Dec 2007
Last Modified: 05 Jan 2011 23:31

Export: EndNote | Dublin Core | BibTeX

Repository Staff Only: item control page