R&D intensity and the performance of IPOs

The importance of innovation resides in the nexus of competitive ability. This article investigates the relationship between Research and Development (R&D) intensity and the performance of Initial Public Offerings (IPOs) in Taiwan. Our empirical results show that most companies have lowered R&D intensity before IPO, whereas they slightly increase R&D intensity after issuance. That implies that earnings manipulation before going public may exist. An additional finding is that, those companies which have gradually increased their R&D intensity prior to IPO perform not only better than the market portfolio in the long run, but also superior to those which spent less in R&D before IPO.