This paper links valuation of different accounting items to R&D investment decisions and investigates how suboptimal R&D choices during IPO are linked to future operating and market underperformance. For firms with substantial growth opportunities, accounting net income is a poor measure of the...

The valuation of STEM (Science, Technology, Engineering and Math) firms has gained attention in the literature over the past two decades. Research has shown that for valuation of STEM firms, accounting items such as sales growth and R&D expenditures are more important than bottom-line earnings....