Pension accrual management and research and development investment |
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| Authors: | Takafumi Sasaki |
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| Affiliation: | School of Management, Tokyo University of Science, Kuki, Saitama, Japan |
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| Abstract: | This study investigates whether discretion in reporting pension expenses mitigates research and development (R&D) manipulation. Using a sample of Japanese 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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| Keywords: | Earnings management Pension accounting Research and development |
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