초록/요약

This paper aims to explore how the productivity of R&D investment is affected by the introduction of International Financial Reporting Standards (IFRS) and audit quality. This study is based on a sample of 3,627 firm-year observations of firms listed on the Korea Exchange (KE) from 2007 to 2014. We estimate the relationship between exogenous R&D expenditure (innovation input) and patent acquisition (innovation output) by removing the effects of contributing factors to mitigate endogeneity problem. We find that the productivity of R&D investment is negatively affected by the adoption of Korean International Financial Reporting Standards (K-IFRS) in 2011. Also, the link between R&D and patenting is stronger for firms with Big 4 auditors than those with non-Big 4 auditors. Further tests show that the positive association between R&D and patenting is weakened after K-IFRS was adopted, but only for firms with Big 4 auditors. The link between R&D expenditure and patent acquisition was significantly positive before K-IFRS and their positive association decreases after K-IFRS, but only for firms with Big 4 auditors. This suggests that Big 4 auditors enforce higher earnings quality and therefore managerial discretion in R&D accounting is constrained by Big 4 auditors. Moreover, the innovation productivity is affected by the new accounting standard when a firm’s audit quality is reasonably assured by Big 4 audits. This study adds to accounting and business research by examining the rol