Abstract: Using data of firms listed in Shenzhen Stock Exchange for the period from 2007 to 2009,this paper examines what motivations affect firms'decisions to capitalize R&D expenditures. Empirical results indicate that the capitalizing ratio is affected by debt covenants and capital market regulation. The higher the firms'financial leverage,the more the firms tend to capitalize R&D expenditures. In poor operating condition,the firms tend to capitalize more R&D expenditures to maintain the listing status or to avoid loss. Motivations of compensation contracts and earnings smoothing cannot explain the choice of R&D expenditures capitalizing very well.