Research and Development Investment and Earnings Quality Based on Regression Analysis

Abstract

Based on the big data of Chinese listed manufacturing firms, we examine the relationship between research and development (R&D) investment and earnings quality. We construct a regression model and find that corporate R&D investment has a positive effect on earnings quality. R&D investment is useful to repress earnings management motives and thus improve earnings quality in listed manufacturing firms in China. And this positive correlation is more significant in state-owned firms than that in non-state-owned firms.