Leverage, R&D expenditures, and accounting conservatism: Evidence from technology firms

Mariem Khalifa, Samir Trabelsi and Hamadi Matoussi

The Quarterly Review of Economics and Finance, 2022, vol. 84, issue C, 285-304

Abstract: We examine whether U.S. high-tech firms are more or less conditionally conservative compared to low-tech firms. We anticipate high-tech firms to display lower conditional conservatism because they are more financially constrained and feature lower level of asset tangibility. In line with our predictions, we show that high-tech companies are less conditionally conservative relative to low-tech companies. We also show that this negative relationship between conditional conservatism and tech-sector membership is attributable to low leverage and high R&D expenditures since SFAS No. 2 allows U.S. companies to expense R&D costs.

Keywords: Conditional conservatism; High-tech; Low-tech; Drivers of conservatism (search for similar items in EconPapers)
JEL-codes: L63 L65 L86 L96 M41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:84:y:2022:i:c:p:285-304

DOI: 10.1016/j.qref.2022.02.002

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