Value Relevance of R&D Reporting: Evidence from IT Companies Listed on China Stock Market
School of Business | Master's thesis
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AbstractAs the result of the adoption of Accounting Standards for Business Enterprise (2006) in the beginning of 2007, the accounting treatment of Research and Development (R&D) expenditure changed dramatically. IT (Information Technology) industry, an R&D intensive industry, was expected to experience more significant change than average. Meanwhile, the financial market in China was increasing mature and investors were becoming more sophisticated. These conditions provide a meaningful ground to investigate the value relevance of R&D reporting based on data of listed IT firms. The work observed all IT firms listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange over the period of 2009 to 2015. In this study, I find evidence supporting the implementation of accounting reforms on R&D increases the value relevance of financial reports. In addition, I also find positive (negative) association between the market value and R&D asset (expense). This study extends the existing studies regarding the effect of R&D reporting reform by using ‘AS-IF’ method. Besides, it collaborates with existing argument that valuation effect of capitalized R&D expenditure is distinct from that of expensed capitalized R&D expenditure. The existence of difference of valuation effect between GEM and Other Boards (Main Board and SME Board) is examined as well, while the study fails to find evidences supporting such difference.
Thesis advisorMao, Yaping
value relevance, R&D reporting, IT, GEM, main board, SME