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Pension accrual management and research and development investment
Author(s) -
Sasaki Takafumi
Publication year - 2017
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12185
Subject(s) - accrual , pension , earnings management , sample (material) , earnings , investment (military) , business , discretion , capital expenditure , economics , finance , accounting , monetary economics , chemistry , chromatography , politics , political science , law
This study investigates whether discretion in reporting pension expenses mitigates research and development ( R & D ) manipulation. Using a sample of J apanese manufacturing firms during the fiscal years 2001–2011 where both pension costs and R & D expenditures have large impacts on the bottom‐line earnings, I find that higher discount rates are associated with higher R & D investment among firms in which pension expenses could have large impacts on reported earnings. I also find that this relationship is found only among firms in high‐tech industries. These results suggest that pension accrual management substitutes costly R & D manipulation that may hurt future competitive edge.
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