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

Gee Jung Kwon

Afro-Asian Journal of Finance and Accounting, 2022, vol. 12, issue 3, 378-398

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. (search for similar items in EconPapers)
Date: 2022
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