Measuring distress risk: The effect of R&D intensity

• 成果类型: Article
• 署名作者: Franzen, Laurel A.; Rodgers, Kimberly J.; Simin, Timothy T.
• 署名单位: University of Texas System; University of Texas Dallas; New York University; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2007.01297.x
• 发表日期: 2007
• 页码: 2931-2967
• 关键词: FINANCIAL-STATEMENTS; information-content; taxable income; bankruptcy; equity; valuation; earnings; returns; probability; prediction

摘要

Because of upward trends in research and development activity, accounting measures of financial distress have become less accurate. We document that (1) higher research and development spending increases the likelihood of misclassifying solvent firms, (2) adjusting for conservative accounting of research and development increases the number of correctly identified distressed firms, and (3) adjusted measures of distress alleviate previously documented anomalously low returns of large, high distress risk, low book-to-market firms. The results hold after updating stale parameters and under various tax assumptions. Our evidence raises concerns about interpretation of extant literature that relies on accounting measures of distress.