Exploring the Relationship between R&D Investment and Earning Quality at Different Technology Levels and Firm Sizes

This research statistically analyzes the effect of a firm’s Ru0026D 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 Ru0026D and the impacts of Ru0026D on a firm’s market value or performance. This research focuses on the relationship between Ru0026D 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 Ru0026D investment. This research discusses the appropriateness of firms’ Ru0026D investments by demonstrating the positive impact of Ru0026D investment on the market value of firms in terms of earning quality.