R&D Expenses and the Expectation of Value Generation in Brazilian Firms

Júlia Peres Tortoli, Anelise Krauspenhar Pinto Figari, Marcelo Augusto Ambrozini, Marcelo Botelho da Costa Moraes


The purpose of this study is to verify the existence of a causal relationship between R&D expenses not activated by Accounting, a proxy for innovation, and the book-to-market ratio (BTM), which demonstrates expectation of value generation in firms. We analyzed a sample composed of 30 Brazilian public firms that disclosed information about R&D expenses in their footnotes, from 2010 to 2015. We applied the Granger Causality Test and the results reveal that INOV causes BTM in a 3-lag cycle and BTM causes INOV in a 4-lag, both with a negative effect. In other words, R&D expenses discharged in the Profit and Loss (P&L) provide an increase in the firm's market value above its book value after 3 years on average. After that, on the 4th. year, occurs the perception of innovation, signaling the evidence of a potential valorization of the company by investors, recognizing a continuous growth cycle. These findings emerge the necessity of a better understanding of the R&D expenses’ role in the value generation process, corroborating with the accounting users’ decision-making process.


R&D expenses; Intangible assets; Innovation; Granger Causality Test.

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