The Effect of Real－activity Earning Management on Relationship between R&D Intensity and Firm Value
Asian Tax Journal Vol. 19 No. 4 (2018), pp. 155-170
Abstract
In this paper, we examine the effects of real－activity earning management on the relationship between R & D intensity and firm value. A number of previous studies have reported positive relationships between R & D intensity and firm value. However, this is likely to be differentiated depending on the earning management. Therefore, we conduct empirical analysis using panel samples composed on KOSPI and KOSDAQ listed companies from 2011 to 2015. We find that the level of the real earning manegement(REM) weakens relationship between the concentration of R & D cost and the firm value. And we divide the REM by managing activities. Earning management by abnormal operating cash flow(AbCFO) have no significant effect on the relationship between R & D intensity and firm value. In addition, Earning management by abnormal production costs(AbProd) weakens, and earning management by abnormal discretionary cost(AbDisc) strengthens relationship between R & D intensity and firm value. This result suggests that earning management which are generally recognized as negative signals are important factors in relationship between R&D intensity and firm value. These results provide an evidence which is practical information that can be considered variously for future positive effects of spending R&D expenditure in making a decision of earning management.
Keywords
- Firm value
- R&D Intensity
- Earning management
- Real－activity earning management
- Abnormal CFO
- Abnormal production cost
- Abnormal Discretionary expense
Related Articles
The Effect of Management Earnings Forecasts on Earnings Management
12(4) 143-171
Earnings Management Using the Tax Expense, Earnings Persistence, Future Firms Performance, and Firms Value
24(3) 93-145
The Effect of the Overvalued Stock Price on Financial Reporting Opacity
21(4) 103-150
A Reexamination of Abnormal Audit Fees or Audit Hours and Audit Quality29) －New Data and New Evidence－
19(5) 9-53
The Effect of the Voluntary Earnings Forecasts Disclosure on the Earnings Management
15(5) 263-291