Chapter 12 Financial Statement-Based Determinants of R&D Investments

This study aims to shed light on driving factors of research and development (R&D) investments by considering financial statement-based characteristics, audit quality, and Schumpeterian variables. This study distinguishes between capitalized R&D investments and expensed R&D investments by taking different accounting treatments into account. Based on a sample of listed manufacturing firms on Borsa Istanbul over 2013–2018, this study concludes that (i) competition (size) decreases (increases) R&D investments, (ii) big4 auditors pay more attention to the proper accounting treatment of R&D investments, (iii) internal financing does not affect R&D investments, and (iv) liquidity (leverage and marketing expenditures) plays a positive (negative) role in only capitalized R&D investments.