Accounting for investments and the relevance of losses to firm value

Hai Wu*, Neil Fargher, Sue Wright

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    21 Citations (Scopus)

    Abstract

    Recent research has documented investment in research and development as a key driver of the market value of currently unprofitable firms (hereafter loss firms) in a knowledge-based economy. We broaden this argument to consider the influence of accounting for investments in general on the relation between current profitability and firm value for loss firms. Specifically, in the context of a resource-based economy, we find that exploration costs, cash flow measures of investment, and research and development costs help to explain the value of loss firms and reduce the negative relation between current profitability and firm value.

    Original languageEnglish
    Pages (from-to)104-127
    Number of pages24
    JournalInternational Journal of Accounting
    Volume45
    Issue number1
    DOIs
    Publication statusPublished - Mar 2010

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