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How R&D investment affects bondholder wealth?

Author

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  • Jiameng Ma
  • Fenglong Xiao
  • Yue Qiu
  • Zongyu Xu

Abstract

Purpose: This paper focuses on creditors as a key group of stakeholders in corporate finance and governance, and develops a contingency perspective to understand how corporate investment in R&D activities affects creditor value through influencing a firm’s creditworthiness among investors.Design: This study is based on a sample of publicly traded firms in the US. during 1994–2017. Various regression models are applied to analyze the archival data.Findings: This paper shows that a firm’s creditworthiness increases with R&D intensity initially but falls when R&D intensity keeps increasing and surpasses a certain threshold. Moreover, such curvilinear relationship is less pronounced when the firm is of low disclosure quality and is less concerned with financial distress.Originality: Although prior research has intensively studied how corporate R&D activities affect shareholders, less attention has been paid to the impact of corporate R&D on other stakeholders. This study fills this void by examining how R&D activities affect creditors.

Suggested Citation

  • Jiameng Ma & Fenglong Xiao & Yue Qiu & Zongyu Xu, 2022. "How R&D investment affects bondholder wealth?," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(2), pages 304-328, March.
    • Handle: RePEc:taf:raaexx:v:29:y:2022:i:2:p:304-328
    DOI: 10.1080/16081625.2020.1726187
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    Cited by:

    1. Mejd Aures BENLALA, 2022. "The Characterization of the Demand Deposit as a Loan under Fractional Reserve Banking: A Critical Legal Analysis," Perspectives of Law and Public Administration, Societatea de Stiinte Juridice si Administrative (Society of Juridical and Administrative Sciences), vol. 11(4), pages 638-649, December.

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