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Technology and Financial Structure: Are Innovative Firms Different?

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  • Marinescu, Ioana
  • Klemm, Alexander
  • Bond, Stephen
  • Aghion, Philippe

Abstract

We use data on publicly traded U.K. firms to investigate whether financing choices differ systematically with R&D intensity. As well as looking at a balance sheet measure of the debt/assets ratio, we also consider the probability of raising finance by issuing new equity, and the shares of bank debt and secured debt in total debt. We find a nonlinear relationship with the debt/assets ratio: firms that report positive but low R&D use more debt finance than firms that report no R&D, but the use of debt finance falls with R&D intensity among those firms that report R&D. We find a simpler relationship with the probability of issuing new equity: Firms that report R&D are more likely to raise funds by issuing shares than firms that report no R&D, and this probability increases with R&D intensity. The shares of bank debt and secured debt in total debt are both lower for firms that report R&D compared to those that do not, and tend to fall as R&D intensity rises. We discuss possible explanations for these patterns.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3200323/aghion_technologyfinancial.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3200323.

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Date of creation: 2004
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Publication status: Published in Journal of the European Economic Association
Handle: RePEc:hrv:faseco:3200323

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  1. Wendy Carlin & Colin Mayer, 1999. "Finance, Investment and Growth," OFRC Working Papers Series 1999fe09, Oxford Financial Research Centre.
  2. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2002. "Distance to Frontier, Selection, and Economic Growth," NBER Working Papers 9066, National Bureau of Economic Research, Inc.
  3. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, Octomber.
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