Knowledge Capital, Intangible Assets, and Leverage: Evidence from U.S. Agricultural Biotechnology Firms
AbstractAgricultural biotechnology firms are high technology companies. Firms in general, and high technology firms in particular, are a set of both assets in place and growth opportunities. This has important implications for managerial decision-making. Knowledge capital motivates exploitation of growth options, which affects firm cash flow. In turn, the level and volatility of firm cash flow influences firm financing decisions. Previous studies suggest that knowledge capital can influence both the location and capital structure of firms in the biotechnology industry. However, empirical analysis has not extended to agricultural biotechnology firms. This research helps in understanding the role of knowledge capital and other intangible assets in capital structure decisions of U.S. agricultural biotechnology firms. Quantitative results indicate that leverage is negatively related to growth and nondebt tax shields. Asset tangibility, size, profitability, and uniqueness are positively related to leverage. Using various characterizations of leverage, our models explain up to approximately 75% of the variation in leverage. Empirically generated elasticities buttress the importance of intangible assets such as knowledge capital and tax shields in capital structure choice. This analysis adds a significant new component to understanding the financing decisions of agricultural biotechnology firms.
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Bibliographic InfoArticle provided by International Food and Agribusiness Management Association (IAMA) in its journal International Food and Agribusiness Management Review.
Volume (Year): 07 (2004)
Issue (Month): 02 ()
Capital structure; Agricultural biotechnology; Knowledge capital; Intangible assets; Agribusiness;
Other versions of this item:
- Sporleder, Thomas L. & Moss, Leeann E. & Nickels, Lori A., 2002. "Knowledge Capital, Intangible Assets, And Leverage: Evidence From U.S. Agricultural Biotechnology Firms," WCC-72 Annual Meeting, June 23-25, 2002, Las Vegas, Nevada 16623, WERA-72 (formerly WCC-72): Western Education\Extension and Research Activities Committee on Agribusiness.
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