The Valuation of R&D Expenditures in Japan

30 Pages Posted: 24 Aug 2009

See all articles by Pascal Nguyen

Pascal Nguyen

Neoma Business School; University of Technology Sydney (UTS); Financial Research Network (FIRN)

Sophie Nivoix

Universite de Poitiers

Mikiharu Noma

Hitotsubashi University - Graduate School of International Corporate Strategy

Multiple version iconThere are 2 versions of this paper

Date Written: August 24, 2009


The difficulty to measure the long-term benefits of R&D expenditures and the distortions induced by R&D accounting suggest that R&D-intensive firms could be undervalued. Using several methods commonly-applied to detect the abnormal returns associated with mispricing, we find no evidence that the value of R&D investments has been underestimated in the Japanese stock market. Although the performance of R&D-intensive firms appears to vary with the overall market direction, the influence of R&D expenditures in monthly cross-sectional regressions is insignificant. Portfolios sorted by R&D intensity also produce insignificant excess returns after controlling for standard risk factors. Given that R&D accounting rules in Japan are similar to those in the US, the results appear to reject the hypothesis that they are the cause of the undervaluation of R&D investments.

Keywords: R&D expenses, accounting distortions, mispricing, abnormal returns

JEL Classification: G14

Suggested Citation

Nguyen, Pascal and Nivoix, Sophie and Noma, Mikiharu, The Valuation of R&D Expenditures in Japan (August 24, 2009). 22nd Australasian Finance and Banking Conference 2009, Available at SSRN: or

Pascal Nguyen (Contact Author)

Neoma Business School ( email )

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University of Technology Sydney (UTS) ( email )

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+61 2 9514 7718 (Phone)
+61 2 9514 7711 (Fax)


Financial Research Network (FIRN)

C/- University of Queensland Business School
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Sophie Nivoix

Universite de Poitiers ( email )

93 avenue du recteur Pineau
Poitiers, 86000

Mikiharu Noma

Hitotsubashi University - Graduate School of International Corporate Strategy ( email )

2-1-2 Hitotsubashi, Chiyoda-ku
Tokyo 101-0003, Chiyoda-ku 101-8439

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