Missing R&D

Posted: 27 Mar 2015 Last revised: 4 Apr 2015

See all articles by Ping-Sheng Koh

Ping-Sheng Koh

ESSEC Business School

David M. Reeb

National University of Singapore

Date Written: March 25, 2015

Abstract

We investigate whether missing R&D expenditures in financial statements indicates a lack of innovation activity. Patent records reveal that 10.5% of missing R&D firms file and receive patents, which is 14 times greater than zero R&D firms. Pseudo-Blank R&D firms (missing R&D firms with patent activity) demonstrate patent filings analogous to the bottom 90%-95% of the positive R&D population. Multivariate difference-in-differences tests indicate that Pseudo-Blank R&D firms are more likely to report R&D after an exogenous auditor change. Finally, we provide simple Monte Carlo simulations to evaluate different methods to handle missing R&D in empirical research.

Keywords: Research and Development, R&D reporting, Disclosure, Blank R&D, R&D simulation

JEL Classification: M41, O32, D83

Suggested Citation

Koh, Ping-Sheng and Reeb, David M., Missing R&D (March 25, 2015). Journal of Accounting & Economics (JAE), Forthcoming , Available at SSRN: https://ssrn.com/abstract=2585306

Ping-Sheng Koh

ESSEC Business School ( email )

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David M. Reeb (Contact Author)

National University of Singapore ( email )

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Singapore, 119245
Singapore

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