Leverage, R&D expenditures, and accounting conservatism: Evidence from technology firms

Author First name, Last name, Institution

Mariem Khalifa, Zayed University
Samir Trabelsi, Goodman School of Business
Hamadi Matoussi, Université de la Manouba

Document Type

Article

Source of Publication

Quarterly Review of Economics and Finance

Publication Date

5-1-2022

Abstract

We examine whether U.S. high-tech firms are more or less conditionally conservative compared to low-tech firms. We anticipate high-tech firms to display lower conditional conservatism because they are more financially constrained and feature lower level of asset tangibility. In line with our predictions, we show that high-tech companies are less conditionally conservative relative to low-tech companies. We also show that this negative relationship between conditional conservatism and tech-sector membership is attributable to low leverage and high R&D expenditures since SFAS No. 2 allows U.S. companies to expense R&D costs.

DOI Link

10.1016/j.qref.2022.02.002

ISSN