R&D Capitalisation and Debt Financing

Event abstract

Existing studies analysing the value-relevance of capitalised R&D exclusively focus on equity markets and thus provide a partial view towards the market implications of R&D capitalisation. This study sheds light on the debt market effects of capitalised R&D, using a global sample of public bonds and private syndicated loans. First, we provide evidence that R&D capitalisation is associated with a firm’s debt market choice. Firms capitalising higher amounts of R&D, they tend to raise funds in the public instead of the private debt market. Second, while analysing the debt market consequences of R&D capitalisation, we show that capitalised R&D investments reduce both bonds and syndicated loan prices. Lastly, we document that debt market participants are able to look through a firm’s motives of R&D capitalisation, as we only find a reduction in the cost of debt when R&D capitalisation is not associated with earnings management purposes.

Speaker biography

Dr Yannis Tsalavoutas is Senior Lecturer in Accounting and Finance at the Adam Smith Business School, University of Glasgow. After completing his undergraduate studies at the Technological Educational Institute of Athens (BSc in Business Administration), Yannis undertook the MBA Programme at the University of Stirling with specialisation in Corporate Finance. In November 2009, he completed his PhD in Accounting at the University of Edinburgh. Yannis' work experience includes positions as an accounting assistant (in Greece) and as a financial accounting and reporting analyst at Company Reporting Ltd in Edinburgh. Prior to joining the University of Glasgow in January 2015, Yannis was a Lecturer in Accounting at the University of Stirling. In parallel to his current post at the University of Glasgow, Yannis is a visiting Lecturer in Accounting at the University of Bamberg, a member of the Accounting Standards Committee of ICAS, Chair of the European Financial Reporting Network (EUFIN), the Treasurer of the Financial Accounting and Reporting Special Interest Group (FARSIG) of the British Accounting and Finance Association and Section Editor for Accounting and Finance for European Management Journal. His work has been published in journals such as Journal of International Accounting, Auditing and Taxation, Accounting and Business Research, Accounting Forum and British Accounting Review, amongst others.