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The changing implications of research and development expenditures for future profitability

Review of accounting studies, 2020-06, Vol.25 (2), p.405-437 [Peer Reviewed Journal]

Springer Science+Business Media, LLC, part of Springer Nature 2020 ;Springer Science+Business Media, LLC, part of Springer Nature 2020. ;ISSN: 1380-6653 ;EISSN: 1573-7136 ;DOI: 10.1007/s11142-019-09528-6

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  • Title:
    The changing implications of research and development expenditures for future profitability
  • Author: Curtis, Asher ; McVay, Sarah ; Toynbee, Sara
  • Subjects: Accounting/Auditing ; Business and Management ; Corporate Finance ; Profitability ; Public Finance ; R&D ; Research & development ; Research & development expenditures
  • Is Part Of: Review of accounting studies, 2020-06, Vol.25 (2), p.405-437
  • Description: We document strong evidence of a declining relation between R&D and future profitability, which coincides with a number of important economic changes, including a significant increase in R&D spending. We identify several contributors to this decline, including changes in the nature and riskiness of R&D projects and a shift in the types of firms undertaking R&D in our sample. We also demonstrate variation in the implications of R&D for future profitability, consistent with diminishing marginal returns to R&D investments. Overall, our evidence suggests that, in earlier periods, investments in R&D offered high returns in U.S. public firms but that in more recent times these returns have stabilized at lower levels. Our study offers important insights for financial statement users, managers, and researchers.
  • Publisher: New York: Springer US
  • Language: English
  • Identifier: ISSN: 1380-6653
    EISSN: 1573-7136
    DOI: 10.1007/s11142-019-09528-6
  • Source: ProQuest Central
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