Accounting for R&D costs is an open issue. Recent research papers show the value relevance of capitalized R&D. We test the value relevance of R&D reporting on a sample of 197 French firms between 1993 and 2002. The French context provides an interesting field for R&D value relevance because both accounting treatments of R&D costs (expensing and capitalization) are allowed. Unlike previous studies, we find that capitalized R&D is negatively associated with stock prices and returns. This implies that investors are concerned with and react negatively to capitalization of R&D.
JENY, A. and JEANJEAN, T. (2006). The Negative Impact of R&D Capitalization: A Value Relevance Approach. European Accounting Review, pp. 37-61.