- Log In/Sign Up
- P-ISSN1738-3110
- E-ISSN2093-7717
- SCOPUS, ESCI
ISSN : 1738-3110
The Effect of R&D Expenditures on Market Value of the Firm: Focusing on Distribution Industry
Abstract
Purpose - In recent digital information society, the most important factor of to increase the firm value of the distribution company is not the activity to increase the sales through the general advertisement of the unspecified majority by purchasing the finished product, but to grasp the needs of the consumers and to develop a new distribution platform that connects producers and consumers directly through consumer-tailored advertisements centering on e-commerce. Therefore each company in the distribution industry is spending a lot on research and development investment to innovate the distribution technology and distribution system, and the research and development investment expenditures can affect firm value. The purpose of this study is to analyze the impact of research and development investment expenditures in the distribution industry on market value of the firm. Research design, data, and methodology - As a research method, the sample firms are those which are listed on korea stock exchange market from 2011 to 2017 and the research model is Ohlson(1995) model, which is a representative valuation model using accounting information. This study analyzes the effect of distribution company's research and development investment expenditures and advertising expenditures on market value of the firm Results - The results of empirical analysis show that research and development investment expenditures for developing new distribution technology and advertising expenditures for promoting sales in the distribution company are all positively related to the market value of firm. Therefore, in describing market value of the distribution company, it is shown that the research and development investment expenditures and advertising expenditures together with the net asset and net profit are the important accounting information that explains the market value of firm. This result show that investment expenditures on research and development for the innovation of distribution technology of distribution company creates intangible intellectual assets and increases market value of the firm. Conclusions - The result of this study shows that research and development investment expenditures for the new distribution technology as well as the spending for the advertisement in the future is a very important investment expenditures that can increase the market value of the distribution company.
- keywords
- R&, D Expenditures, Market Value of the Firm, Distribution Industry
Reference
Ali S. S. Z., Stark, A. W., & Akbar, S. (2008). Firm Size, Sector and Market Valuation of R&D Expenditures. Applied Financial Economics, 4(2), 87-91. doi:10.1080/17446540701537756
Bubiltz, B., & Ettredge, E. (1989). The Information in Discretional Outlays: Advertising, Research and Development. The Accounting Review, 64, 108-124.
Chambers, D., Jennings, R., & Thompson, R. (2003). Managerial Discretion and Accounting for Research and Development Costs. Journal of Accounting, Auditing & Finance, 18(1), 79-114. doi:10.1177/0148558X0301800105
Chauvin, K., & Hirschey, M. (1993). Advertising, R&D Expenditures and the Market Value of the Firm. Financial Management, 22(4), 128-140. doi:10.2307/3665583
Collins, D. W., Pincus, M., & Xie, H. (1999). Equity Valuation and Negative Earnings: The Role of Book Value of Equity. The Accounting Review, 74(1), 29-61.
Feltham, G., & Ohlson, J. (1995). Valuation and Clean Surplus Accounting for Operating and Financial Activities. Contemporary Accounting Research, 11(2), 689-731. doi:10.1111/j.1911-3846.1995.tb00462.x
Hall, B. H. (1993). The Stock Market Valuation of R&D Investment during the 1980's. American Economic Review, 83(2), 259-264.
Han, B. H., & Manry, D. (2004). The Value Relevance of R&D and Advertising Expenditures: Evidence from Korea. The International Journal of Accounting, 39(2), 155-173. doi:10.1016/j.intacc.2004.02.002
Healy, P., Myers, S., & Howe, C. (2002). R&D Accounting and the Tradeoff between Relevance and Objectivity. Journal of Accounting Research, 40(3), 677-710. doi:10.1111/1475-679X.00067
Hirschey, M. (1982). Intangible Capital Aspects of Advertising and R&D Expenditures. The Journal of Industrial Economics, 30(4), 375-390. doi:10.2307/2097924
Hirschey, M., & Weygandt, J. (1985). Amortization Policy for Advertising and Research and Development Expenditures. Journal of Accounting Research, 23(1), 326-335. doi:10.2307/2490921
Lev, B. (2001). Intangibles: Management, Measurement, and Reporting. Washinton D.C., U.S.A.: Brookings Institution Press.
Lev, B., & Sougiannis, T. (1996). The Capitalization, Amortization, and Value-Relevance of R&D. Journal of Accounting and Economics, 21(1), 107-138. doi:10.1016/0165-4101(95)00410-6
Louis K. C. C., Lakonishok, J., & Sougiannis, T. (2001). The Stock Market Valuation of Research and Development Expenditures. The Journal of Finance, 56(6), 2431-2456. doi:10.1111/0022-1082.00411
Ohlson, J. A. (1995). Earnings, Book Values, and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661-687. doi:10.1506/7TPJ-RXQN-TQC7-FFAE
Peles, Y. (1971). Rates of Amortization of Advertising Expenditures. Journal of Political Economy, 79(5), 1032-1058.
- Downloaded
- Viewed
- 0KCI Citations
- 0WOS Citations