{"title":"Auditor specialization in R&D and clients’ R&D investment-q sensitivity","authors":"Eugenia Y. Lee , Wonsuk Ha , Sunyoung Park","doi":"10.1016/j.jcae.2023.100360","DOIUrl":null,"url":null,"abstract":"<div><p>While research and development (R&D) activities contribute to economic growth via technological innovations, they impose significant uncertainty and agency costs. In this study, we examine the governance role of R&D specialist auditors in affecting clients’ R&D investment decisions. Using a sample of U.S. firms during 2001–2016, we find that R&D specialist auditors’ clients make more efficient investments in the form of a higher R&D investment-q sensitivity. We also find that the reduction in discretionary adjustments of R&D expenses moderates the results. Further, when clients are audited by R&D specialists, their R&D investments are more closely linked to innovative output in subsequent years. Collectively, our results suggest that an auditor’s specialized knowledge induces clients to make better economic decisions.</p></div>","PeriodicalId":46693,"journal":{"name":"Journal of Contemporary Accounting & Economics","volume":"19 2","pages":"Article 100360"},"PeriodicalIF":2.9000,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Contemporary Accounting & Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1815566923000103","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 1
Abstract
While research and development (R&D) activities contribute to economic growth via technological innovations, they impose significant uncertainty and agency costs. In this study, we examine the governance role of R&D specialist auditors in affecting clients’ R&D investment decisions. Using a sample of U.S. firms during 2001–2016, we find that R&D specialist auditors’ clients make more efficient investments in the form of a higher R&D investment-q sensitivity. We also find that the reduction in discretionary adjustments of R&D expenses moderates the results. Further, when clients are audited by R&D specialists, their R&D investments are more closely linked to innovative output in subsequent years. Collectively, our results suggest that an auditor’s specialized knowledge induces clients to make better economic decisions.
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