Research and development accounting treatment: effects of CEO characteristics and corporate governance mechanisms

This study aims to examine empirically the influence of Chief Executive Officer (CEO) characteristics and corporate governance mechanisms on Research and Development (R&D) capitalization in France. Using data drawn from a sample of non-financial firms listed in SBF 120, this study provides empirical evidence for the influence of CEO characteristics and audit quality on R&D capitalization. As results, we find that R&D capitalization is likely to be increased in firms managed by younger managers, CEOs with higher ownership, shorter tenure and higher educational level. Also, R&D capitalization is likely to be increased in firms with lower audit quality, in higher leveraged firms, in less performed and larger firms. This study offers insights to investors and accounting standard setters interested about the subject of R&D capitalization determinants. Importantly, it confirms that some CEO characteristics and corporate governance mechanisms are likely to affect the CEO’s behavior regarding the R&D accounting treatment.