R&D-Based Earnings Management and Accounting Performance Motivation

Rihab Guidara and Younes Boujelbene

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2014, vol. 4, issue 2, 81-93

Abstract: R&D treatment could be influenced by earnings management purposes due to the flexibility allowed in the R&D accounting standards. This paper attempts to determine whether discretionary R&D treatments are motivated by financial performance or can be constrained by board independence. The study is conducted on a sample of 410 firm-year French companies investing heavily in R&D in the period 2007-2011 and accounting data are collected from the Worldscope database. Using two logistic regression models, results show that the French companies do not tend to capitalize the R&D expenditures in order to smoothen the results but rather tend to cut the R&D expenditures in order to achieve earnings targets. However, the hypothesis that independent directors reduce R&D manipulation is not supported.

Keywords: Earnings management; R&D capitalization; R&D cut; board independence (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hur:ijaraf:v:4:y:2014:i:2:p:81-93

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