Exploring the Relationship between R&D Investment and Earning Quality at Different Technology Levels and Firm Sizes: Empirical Evidence from US Data

This research statistically analyzes the effect of a firm’s R&D investment on earning quality, which represents the quality of a firm’s financial structure. The data for firms listed on NYSE and NASDAQ for the analysis come from the Wharton Survey’s Compustat Data. Previous studies have mostly focused on evaluating factors that influence R&D and the impacts of R&D on a firm’s market value or performance. This research focuses on the relationship between R&D investment and earning quality. In addition, the analyzed firms are categorized into high-tech, low-tech, small high-tech, big high-tech and growing high-tech firms to understand how each category’s earning quality responds differently to R&D investment. This research discusses the appropriateness of firms’ R&D investments by demonstrating the positive impact of R&D investment on the market value of firms in terms of earning quality.