Title

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

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.

ISSN

Publisher

Elsevier BV

Volume

84

First Page

285

Last Page

304

Disciplines

Business

Keywords

Conditional conservatism, Drivers of conservatism, High-tech, Low-tech

Indexed in Scopus

yes

Open Access

no

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