The influence of R&D activities on the financial performance of firms: Evidence from Malaysia

The main aim of this study is to investigate the influence of R&D activities on the financial performance of the firm. R&D activities were presented by three variables, namely R&D capitalization, R&D expenses, and R&D intensity. Firm financial performance was presented by return on assets (ROA), return on equity (ROE), and Tobin’s Q ratio. Moreover, the study used four control variables, namely, leverage, growth, size, and audit quality. The current study used information from 29 companies listed on Bursa Malaysia from 2013 to 2017 which have five years R&D disclosures information. Linear regression analysis was used to examine the impacts of those variables on financial performance. The results of this study showed that capitalized R&D has a significant negative relationship with ROA and ROE. Similarly, the results show a significant negative relationship between expensed R&D and Tobin’s Q. Also, the R&D intensity showed a positive and significant relationship with Tobin’s Q.