A Study On The Influencing Factors Of R&D Capitalization Of China’s A-share Listed Companies

Since Joseph Schumpeter who is the originator of the theory of self-innovationproposed that "creative destruction", the concept of "innovation" has becomerepresented the organizational change. It is increasingly recognized that technologicalinnovation is the key source of the business competition. In recent years, Chineseenterprises have been increasing internal expenditures in Research and Developmentyear by year. Research and Development expenses (referred to as R&D) hastransformed survival of deciding the dominant force for the knowledge economy erafrom the subordination of the industrial economy era. In China, the country givessome promotion and encouragement to corporate R&D expenses. The NationalBureau of Statistics website also published the inventory results of R&D resources.Be regard as a carrier of technological innovation, research and developmentactivities can enhance the business, industry and overall scientific research level ofthe country. R&D has been more and more attracting people’s attention.China’s "Enterprise Accounting Standards" were revised by Ministry ofFinance and were implemented in2007. Among them, the content of corporate R&Dexpenses in the "Enterprise Accounting Standards No.6-Intangible Assets" hasmade an important adjustment. Before that, the full cost of the policy has beenexecuted. After2007, R&D capitalization policy has been executed in some specificconditions. R&D capitalization was regarded as "double-edged sword ".BecauseR&D capitalization can actively promote independent innovation of enterprises,improve the measurement of the cost of intangible assets, provide a strong signal tothe people who use the financial information.While R&D capitalization can improve corporate earnings, which open the door for managers to manipulate earnings throughR&D capitalization.To this end, this paper analyzes and studies the InfluencingFactors of R&D Capitalization of China’s A-share Listed Companies.Based on the analysis of earnings management theory, signaling theory, theusefulness of financial information theory and so on,this paper selected A-sharelisted companies in Shanghai and Shenzhen which disclosed R&D capitalizationbetween2008and2012as the case study sample, to be analyzed to solve thefollowing problems:(1) the situations of China’s listed company’s overall R&Dinvestment and R&D capitalization;(2) whether the company’s financial leverage,profitability, income smoothing motive, losses motivation have a significant impacton R&D capitalization and how the degree of influence;(3)whether the newly addedvariable-earning management and the nature of actual control have a significantimpact on R&D capitalization;(4) this article full sample is divided into high,medium and low three sub-samples according to the R&D intensity, whether eachfactor has different influence on R&D capitalization in three different groups of sub-samples.After the relevant theoretical and empirical analysis, the conclusions are asfollows:(1) The sample and the investment of China’s A-share listed companies onR&D expenses increasing year by year, the overall development level has beengreatly improved. Many companies have the competitive advantage in the market.(2)Corporate financial leverage and profitability of has a significant impact on theselecting R&D capitalization in accounting policy.(3) Earning management,enterprise losses motivation and actual control of nature has a significant impact onR&D capitalization.(4) The relationship of income smoothing motivation and R&Dcapitalized expenditures have not been confirmed.(5) R&D intensity, the greater thesize, owned high-tech industry, and its R&D capitalization tendency is stronger, while ownership concentration capitalization impact was not significant to R&D.(6)R&D intensity in different groups, the role of each factor is different, low R&Dintensity of companies are more willing to make R&D capitalization choice accordingto corporate profitability, income smoothing motive; medium R&D intensity ofcompanies are more willing to make R&D capitalization choice when their actualcontrol have the nature of state-owned; high R&D intensity of companies, corporateearnings management and the actual control of the property are significant for R&Dcapitalization.Combined research findings, this paper presents the following three policyrecommendations: First, to achieve standards of policy effects better, regulators needlisted companies to improve and standardize the form of R&D and content ofinformation disclosure. Second, companies should allocate of their own resourcesrationally, and actively join the research and innovation, transfer real and effectiveinformation to the market and investors through R&D capitalization and make theirown enterprises rapidly develop. Third, investors should identify and distinguish theauthenticity of R&D capitalization which the corporate disclosure. They will also usehigh quality useful information to support the future of enterprises. From the sense ofinnovation to the innovative thinking, to innovative actions, Chinese enterprises areseeking new development opportunities for enterprises through innovative activities.