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R&D investment and financing choices: A comprehensive perspective

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  • Wang, Taiyuan
  • Thornhill, Stewart
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    Abstract

    We posit that the effects of R&D investment on financing choices depend on the degree of intervention barriers and appropriation discrepancy between capital providers and the firm. Based on these two contingencies, we categorize financing instruments into four types: common equity (common stock), convertible securities (preferred stock and convertible debt), transactional debt (corporate bonds), and relational debt (bank and commercial loans). From the experiences of 39 petroleum firms during the period 1976-2005, we found R&D investment has a positive effect on the use of common equity, a U-shaped effect on the use of convertible securities, and an inverted U-shaped effect on the use of relational debt to raise capital. These effects are sustained over several years.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research Policy.

    Volume (Year): 39 (2010)
    Issue (Month): 9 (November)
    Pages: 1148-1159

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    Handle: RePEc:eee:respol:v:39:y:2010:i:9:p:1148-1159

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    Web page: http://www.elsevier.com/locate/respol

    Related research

    Keywords: Financing choice R&D investment Intervention barriers Appropriation discrepancy;

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    Cited by:
    1. Norden, Lars & van Kampen, Stefan, 2013. "Corporate leverage and the collateral channel," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5062-5072.
    2. ELKEMALI, Taoufik & BEN REJEB, Aymen & MATOUSSI, Hamadi, 2013. "R&D Intensity and Financing Decisions: Evidence from European Firms," MPRA Paper 52059, University Library of Munich, Germany, revised 15 Oct 2013.

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