Capitalization versus Expensing: Evidence on the Uncertainty of Future Earnings from Capital Expenditures versus R&D Outlays

By S. Kothari, Ted E. Laguerre, Andrew J. Leone. 2002

861 citations recorded by the source corpus.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/558cdc8f5d8b82b8cad6343273d3e4f99fadc8b0

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Citations in the corpus

What Determines Residual Income (2001, background): “The advertising conservative accounting factor has an insignificant coefficient, probably due to the short useful life of advertising investments (Kothari et al. 2002).”
Returns on Investments in Information Technology: A Research Synthesis (2002, background): “For example, Kothari et al. (1998) find that current R&D expenditures relate to future earnings variability at a rate that is about three times as large as investments in PP&E. Lev et al. (2000) find that accounting profitability (ROA and ROE) is biased away from economic profitability when the…”
Do Better-Connected CEOs Innovate More? (2014, neutral): “The payoffs also are highly uncertain and the probability of failure is substantial (Bhagat and Welch (1995), Kothari, Laguerre, and Leone (2002)).”
Do Nonfinancial Stakeholders Affect the Pricing of Risky Debt? Evidence from Unionized Workers (2012, positive): “For example, Kothari et al. (2002) show that R&D expenses increase the variability of future earnings by three to four times more than do expenditures in fixed assets.”
Creative destruction and firm-specific performance heterogeneity (2007, background): “Kothari et al. (2002) link R&D to future earnings variability; Chan et al. (2001) find similar results using stock returns; and Barron et al. (2002) link high R&D to the lack of consensus in analysts’ forecasts.”
Demand Uncertainty and Cost Behavior (2014, methodology): “The use of standard deviation as an empirical proxy for uncertainty is standard in the literature (e.g., Dechow and Dichev 2002; Kothari, Laguerre, and Leone 2002; Zhang 2006; Dichev and Tang 2009), and the standard deviation of log-changes in sales is commonly used as a measure of demand…”
The effects of voluntary disclosure and dividend propensity on prices leading earnings (2009, background): “If the benefits from these assets are uncertain, investors will find it more difficult to appraise firm value (Kothari et al., 2002).”
The accounting treatment of intangibles – A critical review of the literature (2011, background): “Khotari, Laguerre, and Leone 2002) also find strong evidence that R&D investments generate future benefits that are far more uncertain than benfits from investments in tangible assets.”
Implications for GAAP from an Analysis of Positive Research in Accounting (2010, background): “…in GAAP financial statements is a discrete point along this continuum where accountants, auditors, regulators, and the courts determine the uncertainty to be unacceptably high for stewardship and contracting purposes (e.g., Kothari et al., 2002; Skinner, 2008a; Ramanna and Watts, 2009).”
On the trade-off between the future benefits and riskiness of R&D: a bondholders’ perspective ☆ (2002, neutral): “3A notable exception is Kothari et al. (2002).”