Research On Value-relevance Of R&D Capitalization And Moderating Effect Of Ownership Structure

It is apparent that R&D activities are playing a more and more important role in keeping core competitiveness of companies, especially for those GEM(Growth Enterprise Market) listed companies. Meanwhile, the new Chinese accounting standards adopted in 2007 allows conditional capitalization of R&D expenditure. Furthermore, the existing researches outcomes from both national and international publications have shown that not only the R&D investment but also the accounting treatment of R&D expenditure has significant impact on the firm value. Therefore, Chinese regulators continually increase the requirement for the R&D information disclosure.Choosing the GEM listed companies from 2009 to 2012 as the sample, this study finds key factors which can make a significant influence on the R&D capitalization theoritically. Firstly, the study builds a multiple linear regression model following the logic of computing the discretionary accruals in Jones model, and computes the normal and discretionary R&D capitalization on the basis of the regression results. Then, this study investigates the value-relevance of R&D capitalization. Finally, this thesis finds the characteristics in ownership structure of the GEM listed companies by comparing with those in the Main Board Market and Small and Medium-sized Board Market. This study also chooses the ownership concentration, the equity restriction ratio and managerial stockholding level as the moderators, and tests the moderating effect on the value-relevance of the normal R&D capitalization.This paper tells us that the factors which can make significant effect on R&D capitalization are including firm size, intangible assets, R&D investment, cash flows of operating activities, the debt-to-asset ratio and whether is the first year for the company to be public. The capital market reflects significantly to normal R&D capitalization rather than actual R&D capitalization. Ownership concentration, managerial stockholding level and equity restriction ratio have a significant moderating effect on the relationship between the normal R&D capitalization and firm value.Generally speaking, strengthening the supervision of R&D information disclosure, indentifying the reasonable capitalized R&D expenditures, establishing effective ownership structure are beneficial for the GRM listed companies and investors in stock market.