1.Introduction 4
1.1Actualities 4
1.2Research question 5
1.3Relevance and objectives 8
1.4Structure 10
2.Research approach 11
2.1.“Usefulness of Financial Statements” versus “Voluntary Disclosure” 11
2.2.Value relevance 14
2.3.Cross-sectional versus time series 17
2.4.Research approach from prior research 18
2.5.Conclusions 19
3.Institutional setting 20
3.1Macro economic analysis 20
3.2Differences from accounting perspective 21
3.3R&D accounting standards 22
3.4Conclusions 24
4.Prior empirical research 25
4.1Capital market research for R&D expenditures 25
4.2Capitalizing versus expensing 27
4.3Specific characteristics 33
4.4Conclusions 37
5.Research design 39
5.1Research question and hypotheses 39
5.2Population and Sample 41
5.3Methodology 44
5.4Conclusions 54
6Statistical tests and analyses 55
6.1Book value model for the cash-expense method 55
6.2Book value model for the successful-efforts method 59
6.3Earnings model for the cash-expense method 61
6.4Earnings model for the successful-efforts method 65
6.5Testing the explanatory powers 68
6.6Conclusion 70
7Analysis 71
7.1 Book value model: successful-efforts versus cash-expense 71
7.2 Earnings model: successful-efforts versus cash-expense 73
7.3 Main research question 75
7.4 Conclusion 78
8Summary and conclusions 79
References 82
Appendix 1 Summary empirical literature 86
Appendix 2 Availability of annual reports and the accounting standard 92
Appendix 3 Testing the variables 94
Appendix 4 Population 102
This research tries to find a relation between information about R&D expenditures and the stock prices. This value relevance research is performed in the automotives industry. The first chapter provides an introduction of this research. First some actualities will be discussed. In the second section the research question and the sub questions will be provided. Afterwards, the objectives, for whom this research is relevant and the new methods used in this research will be described in section four. At the end of this chapter the structure of the paper will be described.
The problem of this research arises with the discussion if projects on research and development of new services and products lead to future benefits. If a firm concluded that R&D projects lead to future economic benefits, they must capitalize their development expenditures in the balance sheet (under IAS 38). If there is an identical company in the US (under FAS No. 2) or Japan; the R&D expenditures need to be expensed in the income state.