Title: The value relevance of research and development expenditures: a comparative analysis of Korean, Japanese, Chinese, and US manufacturers

Authors: Gee Jung Kwon

Addresses: Department of Business Administration and Accounting, Hanbat National University, 125 Dongseodaero, Yuseong-Gu, Daejeon 305-719, South Korea

Abstract: Research and development (R&D) expenditures are generally thought to increase a firm's market value. This study examines the nonlinear value relevance of R&D expenditures from 2006 to 2015 for manufacturers listed on capital markets in Korea, the USA, Japan, and China. In this regard, the study uses a nonlinear validation method based on an analytical model that adds R&D investment variables to a corporate valuation model. The results indicate that Korean and Japanese firms experience an increase in corporate value when they make R&D expenditures but if the firms exceed their R&D expenditure limits, corporate value falls. In US and Chinese firms, R&D expenditures prompt a dramatic rise in corporate value when such expenditures are initially set to exceed certain limits, although R&D activities reduce corporate value in their early stages. Such findings have practical relevance for international investment decisions.

Keywords: research and development; accounting information; corporate value; value relevance; nonlinear value relevance; manufacturer.

DOI: 10.1504/AAJFA.2022.124248

Afro-Asian Journal of Finance and Accounting, 2022 Vol.12 No.3, pp.378 - 398

Received: 13 Jul 2018
Accepted: 28 Feb 2019
Published online: 20 Jul 2022 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article