Disclosure Rules and R&D Spending Revisited

Contemporary Accounting Research, Vol. 11, Issue 1, 1994

University of Alberta School of Business Research Paper No. 2013-660

Posted: 2 Jul 2013

Date Written: June 1, 1993

Abstract

This article reconciles a disparity between one of Hughes and Kao's (1991) predictions on the effects of firm disclosures regarding future benefits of R&D spending and evidence of reductions in R&D spending pursuant to SFAS No. 2 reported by Horowitz and Kolodny (1980) and others. By assuming Bertrand price competition in place of Cournot quantity competition, it is shown that equilibrium R&D expenditures by risk-averse duopolists will be lower when firm disclosures are uninformative about R&D outcomes than when they are informative. This result is especially useful in that price competition appears to be descriptive of competition in high technology industries.

Suggested Citation

Hughes, John and Kao, Jennifer L., Disclosure Rules and R&D Spending Revisited (June 1, 1993). Contemporary Accounting Research, Vol. 11, Issue 1, 1994, University of Alberta School of Business Research Paper No. 2013-660, Available at SSRN: https://ssrn.com/abstract=2276043

Jennifer L. Kao

Independent

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