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Innovation Investment: Behaviour Of Chinese Firms Towards Financing Sources

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  • MUHAMMAD KALEEM KHAN

    (Department of Management Sciences, COMSATS University Islamabad (Sahiwal Campus), 57000, Pakistan)

  • AHMAD KALEEM

    (Faculty of Business and Law, Central Queensland University (Melbourne Campus), 3000, Australia)

  • SALMAN ZULFIQAR

    (Department of Management Sciences, COMSATS University Islamabad (Sahiwal Campus), 57000, Pakistan)

  • UMAIR AKRAM

    (Guanghua School of Management, Peking University, 100871, P. R. China)

Abstract

Although the extant literature on corporate finance has largely focused on capital investments, relatively less attention has been paid to identify how research and development (R&D) related investments are financed. This study empirically tests the relationship between the different financing sources used by firms and their intensity of R&D in the rapidly growing economy of China. Furthermore, we posit that the firm’s choice to adopt the finance source for R&D will change if the firm is likely to be in financial constraints. This study finds out an empirical evidence that internally generated cash flows, bank debt, and seasonal public offerings (SPOs) stipulate a positive impact on R&D of Chinese firms, whereas the issuance of bond impacts it negatively. The study also confirms that financially constrained firms perceive the impact of financing sources on their R&D differently than non-financially constrained firms do. Results also slightly differ between high-tech and non-high-tech firms.

Suggested Citation

  • Muhammad Kaleem Khan & Ahmad Kaleem & Salman Zulfiqar & Umair Akram, 2019. "Innovation Investment: Behaviour Of Chinese Firms Towards Financing Sources," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 23(07), pages 1-29, October.
    • Handle: RePEc:wsi:ijimxx:v:23:y:2019:i:07:n:s1363919619500701
    DOI: 10.1142/S1363919619500701
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