Spending On Research And Development, Business Performance And Market Reaction

Facing the increasingly fierce competition environment, R&D activities are the sources of technology and innovative for enterprises to maintain their core competitiveness, and key factors to seek survival and development. As a result, R&D activities and the associated R&D expenditure information disclosure quality external of the the corporate is regarded the important basis for investors to understand the level and strength of its R&D investment, and to predict its future profitability and development potentiality for decision making. Internationally, there are a large number of empirical studies confirming the measurement methods for R&D expenditures. There were significant differences between the degree of enterprise performance, enterprise value about R&D information disclosure market reaction to the disclosure of R&D investment on firm performance and corporate value, not only R&D expenditures and performance are related, but different R&D information disclosure, the disclosure of the degree of correlation. China’s intangible assets accounting standards change R&D accounting treatment from all expenditured modes to conditional capitalized mode. The market reaction to motivation, resulting in the new guidelines under the Chinese enterprises in R&D information disclosure performance of R&D information become a concern and explore new proposition, and also provides a good opportunity to test the effects of accounting standards change.This paper is different from the existing literature and regard accounting standards change as the system background, based on our corporate agency relationship with the agent, using the method of combining normative and empirical research, from small and medium and GEM listed companies, combing the motives of disclose and characteristics of R&D spending, further test investment in R&D spending amounts and different approach to business performance and market reaction, and then carry out a typical case study on the well-known Chongqing Brewery’s events, in an attempt to answer the accounting treatment of R&D expenditures, and disclosure of the choice of orientation and its economic consequences of the way. The main conclusions are:(1) We analyze the status of R&D expenditure accounting treatment and disclosure of information in the sample, we found most companies owed a full and transparent R&D expenditure information disclosure, and there are significant industry differences in the accounting treatment of R&D expenditure. R&D expenditures in GEM is the proportion of R&D spending in total operating income (6.14%) that is much higher than the SME board (3.79%). The IT industry R&D spending into total operating income highest (9.81%), a comprehensive R&D investment by the lowest (0.07%); capitalized spending accounted for8.39%of operating income; in capital and expenses, the expenditure ratio of the SME board costs (3.22%) higher than the proportion of capital expenditures (1.93%), while the GEM of the capital the proportion (5.15%) higher than the cost of the proportion (3.82%). The R&D investment in GEM are higher than the SME board regardless of the capitalization of expenses or the cost of expenditure.(2) We test the impact the total amount of investment in R&D expenditures and different approach on business performance and found that the current R&D investment was negatively correlated with total business performance, and early R&D investment has a positive correlation total enterprise performance, corporate pre-R&D investment will increase the current level of performance, there is a certain time delay effect that R&D investment on firm performance. However, no consistent correlation between capitalized costs and expenses and business performance of enterprises(3) We inspect the market reaction caused by the total amount of investment in R&D expenditures and different approach, found that the current total R&D investment, capital expenditures, costs of spending respectively has a positive correlation, negative correlation, positive correlation with closing price in next year April of the last three trading days, and R&D spending into the cumulative abnormal return for three days before the release of the total annual reports a positive correlation. Show that R&D spending corporate disclosure information on stock prices and stock returns has a positive role in promoting the disclosure of R&D spending has a good market response.(4) This dissertation put forward relevant policy recommendations based on the theory and empirical results regarding corporate R&D expenditure accounting treatment and disclosure of information.