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R&D-Based Earnings Management and Accounting Performance Motivation

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  • Rihab Guidara
  • Younes Boujelbene

Abstract

R&D treatment could be influenced by earnings management purposes due to the flexibility allowed in the R&D accounting standards. This paper attempts to determine whether discretionary R&D treatments are motivated by financial performance or can be constrained by board independence. The study is conducted on a sample of 410 firm-year French companies investing heavily in R&D in the period 2007-2011 and accounting data are collected from the Worldscope database. Using two logistic regression models, results show that the French companies do not tend to capitalize the R&D expenditures in order to smoothen the results but rather tend to cut the R&D expenditures in order to achieve earnings targets. However, the hypothesis that independent directors reduce R&D manipulation is not supported.

Suggested Citation

  • Rihab Guidara & Younes Boujelbene, 2014. "R&D-Based Earnings Management and Accounting Performance Motivation," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 81-93, April.
    • Handle: RePEc:hur:ijaraf:v:4:y:2014:i:2:p:81-93
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    References listed on IDEAS

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