Real effects of capitalized research and development expenditures: a leading indicator for future innovation performance?

Wolfgang Herb, Maria Lotze, Wolfgang Schultze () and Philipp Sandner
Additional contact information
Wolfgang Herb: University Augsburg
Maria Lotze: University Augsburg
Wolfgang Schultze: University Augsburg
Philipp Sandner: Frankfurt School of Finance & Management

Review of Quantitative Finance and Accounting, 2025, vol. 64, issue 1, No 12, 417-473

Abstract: Abstract This paper analyzes the relationship between capitalized Research and Development (R&D) expenditures under IFRS and innovation performance measured by patent data. Under IFRS, development expenditures are capitalized when the success of an R&D investment is highly likely. Hence, such capitalization could be a leading indicator for future innovation performance. We analyze this question based on a hand-collected sample of R&D capitalization data under IFRS and patent data from the European Patent Office’s Worldwide Patent Statistical Database. We find that the capitalization rate of R&D is positively related to future patent applications and citations as measures of future innovation performance. We also find a positive association with measures of future financial performance. The results imply that the rate of R&D capitalization is informative and can be considered a leading indicator for future innovation performance.

Keywords: Earnings management; Innovation; Research and development (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11156-024-01310-3 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:64:y:2025:i:1:d:10.1007_s11156-024-01310-3

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-024-01310-3

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().