THE DETERMINANTS OF NEW CAPITALIZATIONS OF R&D EXPENSES IN CANADA

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Abstract

Under certain conditions, Canadian and international accounting standards allow firms to present R&D costs in their balance sheets (capitalization). This article analyzes the determinants of new capitalizations of R&D costs by focusing on positive accounting theory and the influence of the CEO. Based on a sample of 440 observations of Canadian firms between the years 2000 and 2003, the results show that the size, debt load, presence of a CEO who holds an important but not majority block of shares, and CEO’s years of seniority all influence the decision to present new capitalizations of R&D costs. The presence on the board of an important stockholder other than the CEO attenuates the influence of the CEO.

Keywords: Capitalization, R&D, Positive Accounting Theory, Influence of CEO, Canada

How to cite this paper: Batrinu, F.-N., & Rakoto, P. (2010). The determinants of new capitalizations of R&D expenses in Canada. Corporate Ownership & Control, 8(1-2), 281-295. https://doi.org/10.22495/cocv8i1c2p3