Effects of Advertising and R&D on the Intangible Assets for the Japanese Manufacturing Firms: A Panel Data Analysis

• Published in: The Journal of Management Accounting, Japan Vol. Supplement1; pp. 39 - 53
• Main Authors: Ogata, Isamu, Tsukuda, Yoshihiko
• Format: Journal Article
• Language: English
• Published: The Japanese Association of Management Accounting 2006
• Subjects: advertising; intangibles; market valuation; panel data; R&D
• ISSN: 0918-7863; 2434-0529
• DOI: 10.24747/jma.Supplement1.0_39

This paper analyzes the effects of advertising and R&D expenditures on the values of intangibles for the 382 Japanese manufacturing firms for 12 years from 1990 to 2001. The advertising and R&D expenditures significantly increase the value of intangibles only for 25% of the firms, but for the other 75% neither the advertising nor R&D expenditure increases the value of intangibles. This finding suggests the inappropriateness of imposing an identical relationship over all the firms. We also demonstrate that the accounting data for our analysis exhibits a panel structure with cross-section and time series properties, which leads to apply a generalized least squares (GLS) method of estimation to the regression model instead of conventional ordinary least squares. To our knowledge, there has never been previous analysis applying the GLS method to the time series data. This method is potentially applicable to many problems in the field of accounting.