Earning Management,R&D Investment And Enterprise Value

In recent years,Chinese research and development(R&D for short)spending has shown a steady growth trend,according to the data from the Chinese Ministry of Science and Technology,in 2014,Chinese R&D investment has been ranked second in the world and it became the highest range of growth among the world.However,the R&D technology,sustainable innovation capability and patent output level of our country hasn't reached the world leading level,which didn't correspond with the high growth trend of R&D investment in China.So which are the factors that brought on the massive R&D investment cannot improve the enterprise value?This's a topic merit great concern.With the sharply increase of enterprise's R&D investment,a huge amount of R&D expenditures will make a significant influence to the enterprise's financial condition,both of the cross term arrangement for R&D expenditure and the accounting measurement of R&D expenditure will affect enterprise's performance and profits,so the R&D expenditure is likely to be managed by the managers and the current accounting standards provides feasibility for this motivation.Although there are numerous studies have confirmed the value relevance of R&D and the impact of earning management by utilizing the R&D investment,there are no articles investigate the effect of the contingency factors of the value relevance of R&D investment from the two perspectives of accrual earnings management and real earnings management.So this article puts this as the breakthrough point and hopes to further explore this issue.Based on the 3,768 sample data from 2007-2014 and from 10 industry of Chinese A-share listed companies,this paper took the relationship of the earning management,R&D investment and the enterprise value as the research object,and explored the impact of R&D investment on enterprise value within and without considering the impact of earning management.Based on the classical model of the accrual earnings management and real earnings management,this paper established the five multiple regression model and set the enterprise value as the explained variable,the product of R&D investment strength and proxy variables of earnings management as explanatory variables,the asset size,solvency and profitability indicators as control variables,and focued on the impact of earnings management on the enterprise value by using R&D investment.The descriptive statistics analysis of earning management and R&D investment of this paper finds that:(1)overall,the R&D investment index is not more than 2%on the average and don't reach the international survival line,the overall R&D investment is in a relativily low lever.The trend analysis finds that although the R&D investment index declined slightly in 2014,but it shows an overall increasing trend year by year.And the industry analysis finds that the difference is obvious and the overall R&D investment lever of technology industry is significantly higher than other industries.(2)The accrual earning management and real earning management has great volatility in different years and the different earning management has different trends,which indicate that the enterprises would use different earning management methods.The regression analysis result of this paper indicates that:(1)without considering the impact of earnings management,R&D investment has a significant positive correlation with the enterprises value.(2)The accruals earnings management activities will decrease this value relevance.(3)In the real earnings management activities,although the sales control and expenses control will improve this value relevance,the production control will decrease this value relevance,and the comprehensive effect of the above three factors are decrease the positive relevance of R&D investment to enterprise value.Finally,based on the above conclusion,this paper suggested that continually increase the R&D investment,at the same time,strengthen the supervision to the accruals and real earnings management activities of enterprises,standardize the R&D information disclosure,in order to prevent the earnings management activities to damage the enterprise value through utilizing the R&D investment.