This study examines the effects of reducing the tax incentive of R&D credit by the 2010 Act for Industrial Innovation on the R&D expenditures of Taiwanese listed and OTC companies. The results show that high-tech electronics companies and companies with greater growth opportunity and greater financial constraint appear to decrease their R&D intensity after the implementation of the Act for Industrial Innovation. However, using biologics companies which are not affected by the effect of the Act for Industrial Innovation as contrast sample, we do not find the same adverse effect on R&D spending for biologics companies in the post-2010 period. Further, we find that, after the implementation of the Act for Industrial Innovation, changes in firms’ R&D spending become less volatile, and the positive correlation between firms’ pre-R&D earnings and R&D credit becomes more pronounced. Taken together, the results show that the reduction in R&D credit rate and prohibiting R&D credit from carrying forward into future years by the Act for Industrial Innovation induce firms to change their R&D spending amount and pattern.
英文關鍵字
R&D Expenditure, R&D Investment Credit, Tax Incentive, Act for Industrial Innovation, Act for Upgrading Industries
