Table 7

Difference in future profitability between capitalization and expense-all firms

Return on assetsReturn on equity
ROAi,t+1ROAi,t+2ROAi,t+3ROEi,t+1ROEi,t+2ROEi,t+3
RDCi,t−0.008***−0.009***−0.008***−0.015***−0.017***−0.016***
(−8.60)(−6.17)(−4.11)(−8.67)(−6.75)(−4.89)
ROAi,t0.565***0.469***0.405***   
(34.42)(22.20)(14.93)   
ROEi,t   0.503***0.375***0.325***
   (32.39)(16.94)(12.30)
Sizei,t0.006***0.005***0.005***0.013***0.013***0.012***
(11.36)(6.36)(4.04)(12.41)(7.96)(5.56)
Levi,t−0.032***−0.032***−0.026***−0.0080.0030.017
(−11.09)(−7.24)(−4.40)(−1.52)(0.37)(1.64)
MBi,t0.012***0.008***0.005**0.023***0.018***0.011***
(11.44)(4.83)(2.18)(11.78)(5.87)(2.89)
Growthi,t0.007***−0.006*−0.018***0.020***−0.003−0.027***
(3.44)(−1.95)(−4.52)(5.06)(−0.45)(−3.70)
RDinti,t0.491***0.576***0.619***1.025***1.297***1.253***
(13.07)(10.82)(8.51)(15.65)0.013***(9.96)
Constant−0.102***−0.053**−0.071**−0.241***−0.209***−0.217***
(−7.09)(−2.40)(−2.55)(−9.54)(−5.87)(−3.84)
Fixed Effects
IndustryYESYESYESYESYESYES
YearYESYESYESYESYESYES
# of Obs.11,1108,2245,89911,1108,1945,868
Adj. R20.5110.3500.2570.4180.2640.194

Note(s): All variables are defined in Appendix. The robust t statistics shown in parentheses are based on the firm-clustered standard errors. *, ** and *** represent the statistical significance level of 10%, 5% and 1%, respectively

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