Creating value via R&D, marketing costs and financial matters

Abedalqader Rababah, Homa Molavi, Shayan Farhang Doust

Research output: Contribution to journalArticlepeer-review

Abstract

Purpose
The aim of this study is to examine the effect of financial leverage impact on customer satisfaction and marketing costs including research and development (R&D) and advertisement costs. Furthermore, the authors aim to investigate whether customer satisfaction as well as financial distress moderates the effect of financial leverage impact on customer satisfaction and marketing costs including R&D and advertisement costs.

Design/methodology/approach
The statistical population of this study consists of listed companies on the Tehran Stock Exchange manually obtained from different industries in 2017. Multivariate regression based on data compilation methodology is used to test research hypotheses.

Findings
The results indicate that financial leverage is negatively and significantly associated with customer satisfaction and this negative relationship is more pronounced in companies with lower sale growth. Furthermore, the authors' results suggest that customer satisfaction negatively (positively) and significantly affects firm value in companies with lower (higher)-financial leverage. The authors also demonstrate that there is no significant relationship between financial leverage caused by financial flexibility and firm value caused by customer's satisfaction (CS). The authors' findings also suggest that financial distress significantly affects the relationship between financial leverage and customer satisfaction. Finally, the authors' find that financial leverage significantly affects firms' R&D and advertisement costs.

Research limitations/implications
Since the fundamental institutional assumptions underpinning the Western and even East Asia financial models are not valid in the institutional environment of Iran, the authors' findings could provide substantial implications for the authors' understanding of the relationship between finance and R&D costs and contribute substantially to customer satisfaction and firm value literature as well. The sample country of the present paper has recently experienced a spate of financial collapses that somewhat contributes, indirectly, to financial distress incurred by the Iranian firms. Moreover, R&D costs are growing among the Iranian quoted firms.

Originality/value
Since the fundamental institutional assumptions underpinning the Western and even East Asia financial models are not valid in the institutional environment of Iran, the authors' findings could provide substantial implications for our understanding of the relationship between finance and R&D costs and contribute substantially to customer satisfaction and firm value literature as well. The sample country of the present paper has recently experienced a spate of financial collapses that somewhat contributes, indirectly, to financial distress incurred by the Iranian firms. Moreover, R&D costs are growing among the Iranian quoted firms.
Original languageEnglish
Pages (from-to)863-883
Number of pages21
JournalJournal of Applied Accounting Research
Volume23
Issue number4
Early online date19 Apr 2022
DOIs
Publication statusPublished - 5 Jul 2022

Keywords

  • Customer's satisfaction
  • Financial crisis
  • Financial leverage
  • Firm value
  • Research and development costs

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