Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318571 
Year of Publication: 
2024
Citation: 
[Journal:] Review of Quantitative Finance and Accounting [ISSN:] 1573-7179 [Volume:] 64 [Issue:] 1 [Publisher:] Springer US [Place:] New York, NY [Year:] 2024 [Pages:] 417-473
Publisher: 
Springer US, New York, NY
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.
Subjects: 
Earnings management
Innovation
Research and development
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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