Innovation quality of firms with the research and development tax credit

摘要: This paper examines innovation quality of U.S. research tax credit users (i.e., firms with currently earned credits). Prior literature reports that the is effective in increasing and development (R&D) expenditures reducing managers’ myopic behavior. However, little known about real (or economic) effect R&D credits, as most these findings have been based on estimated credits rather than actual credits. Additionally, some researchers government still concerns by criticizing ambiguity complexity codes (IRC Section 41). Therefore, I use identified firms’ 10-K state identification tests to reduce endogeneity issues. My results indicate generating contributes better higher return volatility but lower pre-tax profitability. Overall, imply enacting provisions would trigger innovation.