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R&D Intensity and Financing Decisions: Evidence from European Firms

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  • ELKEMALI, Taoufik
  • BEN REJEB, Aymen
  • MATOUSSI, Hamadi

Abstract

This paper examines whether research and development (R&D) intensity affects the firm’s financing decisions. We use a sample of European firms in the period 2002-2011. We argue that R&D asset has three fundamentals characteristics that make it different from ordinary investment and constrain financing choices of the firm. First, The R&D is a specific non-redeployable asset with higher premium risk. Second, it generates stronger growth opportunities and, third, represents a major contributor to asymmetric information. Based on the implications of the transaction cost theory, the agency cost and pecking order theory, we argue that these fundamentals characteristics affect the financial policy. Our results show that R&D-intensive firms exhibit lower leverage, a shorter debt maturity, a lower dividend payment and a higher cash level.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52059.

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Date of creation: 28 Jul 2013
Date of revision: 15 Oct 2013
Handle: RePEc:pra:mprapa:52059

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Keywords: R&D intensity; asset specificity; growth opportunities; information asymmetry; financing decisions;

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