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Economic relevance and determinants of R&D capital in different financial systems

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  • Pasi Karjalainen
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    Abstract

    This paper investigates a firm's investments in research and development (R&D) capital in different financial systems. This study examines both country-specific and firm-specific factors in the creation of a firm's R&D capital. The economic relevance of the estimated R&D capital in different financial systems is examined by associating the ratio of estimated R&D capital to the difference between the market and book value of equity (unrecorded goodwill) with different firm-specific characteristics. The results indicate that the ratio of the firm's R&D capital relative to its unrecorded goodwill is significantly higher in bank-based than market-based financial system. Different firm-specific determinants like past profitability and growth of the firm significantly explain the estimated R&D capital of the firm in both financial systems. The effects of past profitability and growth on the R&D capital are stronger in bank-based than market-based financial system, which highlights the role of bank-based financing over market-based financing in the firms' investments in R&D capital.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Accounting, Auditing and Performance Evaluation.

    Volume (Year): 4 (2007)
    Issue (Month): 1 ()
    Pages: 1-30

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    Handle: RePEc:ids:ijaape:v:4:y:2007:i:1:p:1-30

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    Web page: http://www.inderscience.com/browse/index.php?journalID=41

    Related research

    Keywords: cost basis method; estimated R&D capital; firm-specific characteristics; financial systems; R&D investment; research and development; equity.;

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