Journal of Accounting and Economics Vol. 35 No. 2 2003
On the trade-off between the future benefits and riskiness of R&D: a bondholders’ perspective
Abstract
Existing studies on the value-relevance of R&D tend to overstate the R&D benefits and shed little light on the trade-off between the R&D benefits (mean effect) and their riskiness (variance effect). This study shows that the variance effect of R&D is on average more significant than their mean effect in bond valuation. Hence, for creditors, the R&D risk dominates their benefits. Furthermore, this study documents that R&D measures alone explain approximately 80% of cross-sectional variations in bond ratings and risk premium. These findings contribute to the debate over R&D accounting and the bond pricing literature.
- DOI
- 10.1016/s0165-4101(03)00020-x
- Volume
- 35
- Issue
- 2
- Pages
- 227-254
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib