R&D Disclosures and Capitalization under IAS 38 - Evidence on the interplay between national institutional regulations and IFRS adoption

Item Type Journal paper
Abstract

Based on the notion that the effects of IFRS adoption are dependent on changes in the institutional environment, this paper analyses the effects of one prominent feature of IFRS: the accounting for research and development (R&D) under IAS 38. In our setting, IFRS adoption is accompanied by a change in the national institutional environment of R&D disclosure in the management commentary. National disclosure regulations can make R&D capitalization more informative when investors are skeptical of capitalization due to reliability concerns. We find that firms with higher levels of R&D disclosures that are not suspect of earnings management generally have lower cost of capital and higher market values. Their cost of capital increase and market values decrease with higher R&D capitalization, indicating that capitalization introduces information uncertainty that cannot be resolved by better disclosure. The findings imply that the institutional effect of disclosure has a strong influence on IFRS informativeness.

Authors Dinh, Tami; Schultze, Wolfgang; List, Thomas & Zbiegly, Nadine
Journal or Publication Title Journal of International Accounting Research
Language English
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date 2020
Volume 19
Number 1
Page Range 29-55
Depositing User Prof. Dr. Tami Dinh
Date Deposited 21 Jan 2021 12:11
Last Modified 22 Jan 2021 09:51
URI: https://www.alexandria.unisg.ch/publications/259385

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Citation

Dinh, Tami; Schultze, Wolfgang; List, Thomas & Zbiegly, Nadine (2020) R&D Disclosures and Capitalization under IAS 38 - Evidence on the interplay between national institutional regulations and IFRS adoption. Journal of International Accounting Research, 19 (1). 29-55.

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https://www.alexandria.unisg.ch/id/eprint/259385
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