The relevance to firm valuation of research and development expenditure in the Australian health-care industry

Mitrione, Lorena, Tanewski, George and Birt, Jacqueline (2013) The relevance to firm valuation of research and development expenditure in the Australian health-care industry. Australian Journal of Management, 39 3: 425-452. doi:10.1177/0312896213496256


Author Mitrione, Lorena
Tanewski, George
Birt, Jacqueline
Title The relevance to firm valuation of research and development expenditure in the Australian health-care industry
Journal name Australian Journal of Management   Check publisher's open access policy
ISSN 0312-8962
1327-2020
Publication date 2013-09-01
Year available 2013
Sub-type Article (original research)
DOI 10.1177/0312896213496256
Volume 39
Issue 3
Start page 425
End page 452
Total pages 29
Place of publication London, United Kingdom
Publisher Sage Publications Ltd.
Language eng
Formatted abstract
The health-care industry requires large expenditure on research and development (R&D), with many projects undergoing long development cycles, usually with uncertain outcomes. Extant research has mainly concentrated on the health-care industry in the United States, where R&D costs are expensed as incurred. Previous Australian research has found mixed results in relation to R&D expenditure and changes in share price. This study investigates whether R&D expenditure reported in the health-care industry since the introduction of IAS 38 is significantly associated with share price. Results of the study show that expensed R&D is value-relevant, while a comparison of the pre and post-IAS 38 periods (including pre-global financial crisis (GFC) and GFC periods) shows a statistically significant improvement in the explanatory power of the regression model post-IAS 38, suggesting that R&D expenditure reported under the new standard IAS 38 is more useful for decision-making by investors compared with reporting under AASB 1011.
Keyword Biotechnology
Capitalised
Expenditure
Health care
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Published online 3 September 2013.

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
UQ Business School Publications
 
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Created: Tue, 29 Oct 2013, 22:14:28 EST by Karen Morgan on behalf of UQ Business School