The valuation of R&D expenditures in Japan

Blackwell Publishing
Publication Type:
Journal Article
Accounting & Finance, 2010, 50 (4), pp. 899 - 920
Issue Date:
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The difficulty to measure the long-term benefits of R&D expenditures and the distortions induced by R&D accounting suggest that R&D-intensive firms could be undervalued. Using several methods commonly applied to detect the abnormal returns associated with mispricing, we find little evidence that the value of R&D investments has been underestimated in the Japanese stock market. Given that R&D accounting rules in Japan are similar to those in United States, the results appear to reject the hypothesis that accounting biases are the cause of the undervaluation of R&D investments observed in the United States.
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