The Role of R&D Capitalisations in Firm Valuation and Perfor Mance Measurement

Tony Abrahams and Baljit K. Sidhu
Additional contact information
Tony Abrahams: Australian Graduate School of Management, The University of New South Wales, Sydney NSW 2052; E†mail: b.sidhu@unsw.edu.au
Baljit K. Sidhu: Australian Graduate School of Management, The University of New South Wales, Sydney NSW 2052; E†mail: b.sidhu@unsw.edu.au

Australian Journal of Management, 1998, vol. 23, issue 2, 169-183

Abstract: We investigate the value†relevance of capitalised R&D on the balance sheet, and the extent to which R&D accruals improve the association between accounting†based measures of firm perfor Mance and capital market returns for Australian listed companies. This is a regulatory setting where management discretion in the capitalisation decision is permitted and can be empirically observed. Our results suggest that capitalised R&D on the balance sheets of selective capitalisers is value†relevant; that is, the ability of capitalised R&D to explain infor Mation contained in prices (given infor Mation conveyed by other components of the balance sheet) is statistically significant. For the same group of firms R&D accruals (particularly the initial capitalisation) improve accounting earnings as a measure of perfor Mance but only for the pooled sample using contemporaneous returns. The results for the fully expensing sample are less clear, perhaps due to the small sample size.

Keywords: RESEARCH AND DEVELOPMENT; ACCOUNTING ACCRUALS; VALUE RELEVANCE; PERfor MANCE MEASURES (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/031289629802300203 (text/html)

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:sae:ausman:v:23:y:1998:i:2:p:169-183

DOI: 10.1177/031289629802300203

Access Statistics for this article

More articles in Australian Journal of Management from Australian School of Business
Bibliographic data for series maintained by SAGE Publications ().