Revisiting the ability of research and development activities to improve value relevance

Sulistiawan, Dedhy and Rudiawarni, Felizia Arni (2024) Revisiting the ability of research and development activities to improve value relevance. Business Process Management Journal, 31 (1). pp. 228-244. ISSN 1463-7154

PDF Felizia Arni Rudiawarni_Revisiting the ability of research.pdf Download (1MB)

Abstract

Purpose This article aims to evaluate the informativeness of accruals on stock prices. Investors may misinterpret the information contained in accruals and produce accrual anomalies. Accruals accounting improves the quality of financial statements by providing useful information, although it also contains judgments and is less objective than operating cash-flows. Design/methodology/approach We employ data panel regression analysis to investigate the value relevance of financial information. Our study takes the object of companies listed on the Nasdaq stock exchange (NASDAQ) as the representative of the prominent stock exchange for technology-driven enterprises and entrepreneurs. Expanding the findings, we also use Shanghai Stock Exchange (SSE) data. Findings Our research finds that accruals are still relevant. However, firms with R&D expenditures reduce the ability of accruals to explain stock prices for non-technology firms and firms without intangible assets. After analyzing only tech firms (and firms with intangible assets), our tests show that R&D expenditures improve the relevancy of accruals. These findings apply to both Nasdaq and SSE. Practical implications Practitioners and the investment community get valuable insights into how the recognition and measurement of R&D expenditures affect the value relevance. Information about R&D increases relevancy only in firms with intangible assets and those that operate in the technology industry. Originality/value Our paper provides benefits by using R&D expenses to affect accruals' informativeness by comparing two countries with different recognition of R&D.

Item Type:	Article
Uncontrolled Keywords:	Accruals, Innovation, Stock price, R&D, Valuation
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HF Commerce > HF5601 Accounting H Social Sciences > HG Finance
Divisions:	Faculty of Business and Economic > Department of Accounting
Depositing User:	Felizia Arni Rudiawarni 31129
Date Deposited:	30 Aug 2024 05:27
Last Modified:	20 Jan 2025 05:14
URI:	http://repository.ubaya.ac.id/id/eprint/47024

Actions (login required)

View Item