The Change in Corporate Rating Standard on R&D Expenditures in Recent Periods

42 Pages Posted: 26 Jul 2017 Last revised: 7 Feb 2019

See all articles by Hyungjin Cho

Hyungjin Cho

Inha University - College of Business Administration

Sera Choi

Seoul National University - College of Business Administration

Date Written: February 5, 2019

Abstract

This study contains exploratory examination on the change in the relation between corporate credit ratings and R&D expenses. Using U.S. firms with a credit rating from 1987 to 2013, we find that the negative relation between credit ratings and R&D expenditures in early periods has become weaker over time. The positive association between R&D expenditure and future performance is decreasing in recent periods, discarding the potential explanation on our finding that better R&D profitability would induce rating agencies to assess R&D expenditures more positively. This finding is also not explained by the change in sample composition and the recognition of intangible assets.

Keywords: Corporate Credit Rating, Research and Development, Innovation, Knowledge Industry

JEL Classification: G24, M41

Suggested Citation

Cho, Hyungjin and Choi, Sera, The Change in Corporate Rating Standard on R&D Expenditures in Recent Periods (February 5, 2019). Available at SSRN: https://ssrn.com/abstract=3008569 or http://dx.doi.org/10.2139/ssrn.3008569

Hyungjin Cho (Contact Author)

Inha University - College of Business Administration ( email )

Incheon
Korea, Republic of (South Korea)

Sera Choi

Seoul National University - College of Business Administration ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

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