The Value Relevance Of Research & Development Expenditure In High-tech Enterprise

In the age of knowledge-based economy, knowledge and technology is the power of economic development. The competition among companies is mainly on the innovation of technology. With the development of the age, companies is gradually conscious of the importance of research and development activities, more and more capital is invested in R&D activities, Which results in bigger and bigger proportion of R&D expenditure in companies'expenditure. Compared to traditional enterprises, the high-tech enterprises have more knowledge, so, they need more capital to make innovations, and for the maintenance of their advantage in the dog-eat-dog society, the high-tech enterprises need to make innovations to original technology or product and so on, all these need more capital in R&D activities. Consequently, high-tech enterprises are typical of all kinds of enterprises. But, is the R&D expenditure correlated with stock price in high-tech enterprises?On the study of the value relevance of R&D expenditure in public companies, most studies concluded that R&D expenditure was correlated with stock price. At present, the study in China is still in an exploratory stage. The new accounting standards stipulate that R&D expenditure should be partly capitalized. But in the old accounting standards, R&D expenditure was recorded into the profits and losses of the current period. Since new accounting standards in China have been put into practice, method for coping with R&D expenditure changes a great deal. The R&D expenditure could reflect the value of enterprises., Which has made it possible for the study of the value relevance of R&D expenditure in Chinese public companies. R&D expenditure information can help investors make better decision. But few articles are on the study of value relevance of R&D expenditure. So it is extremely urgent to study the value of R&D expenditure in China.On the base of reading mass references, I find that few scholars study the value relevance of R&D expenditure from many aspects. Most articles don't study this problem from different trades. Few articles study it from high-tech enterprises. So I select high-tech enterprises as the object of my study and divide R&D expenditure into development expenditure, capitalized R&D expenditure and R&D expenditure that should be recorded in the profits and losses of the current period.This paper includes four parts:the first part is introduction which contains the research background, the former research literature at home and abroad, the train of thought, the methods and innovation. The second part make theoretical define on high-tech enterprise and R&D expenditure, summarize the theory of the value relevance of R&D expenditure and analyze the relevance between R&D expenditure and enterprise value. The third part use linear regression models to prove the value relevance of R&D expenditure. The result indicated that capitalized expenditure is corrected with stock price, but development expenditure and R&D expenditure which should be recorded in the profits and losses of the current period are nor corrected with stock price. The fourth part draws a conclusion from empirical research, points out the limitation and prospects future development in this field.The innovation in this thesis:(1) Approach Innovation. At present, just few scholars study value relevance of R&D expenditure from high-tech enterprises in China. The former study selects the enterprises in high-tech industry as high-tech enterprises. This thesis selects Chinese public companies which are recognized as high-tech enterprises. (2)Sample Innovation. This thesis chooses the financial data of high-tech enterprises from 2007 to 2009 as the sample when new accounting standards are implemented. The former research didn't study value relevance of R&D expenditure in this period because of time limitation.