The Value-Relevance of R&D Expenditure: Experience from China

Abstract

This paper investigates the value-relevance of research and development (R&D) expenditures in China for the first time by using a sample of all Chinese listing companies' data, the results indicate that R&D expenditure can bring future benefits in Chinese companies, but the stock market can not evaluate the R&D investment very well. Based on the results, the paper especially suggests that the future research of R&D problems should consider industry as an important factor, and the managers may use the new accounting standard of capitalizing R&D expenditure as a new method for earning management.