Finance and R&D Investment: Is there a Debt Overhang Effect on R&D Investment?
2009 (English)Report (Other academic)
The motivation of this paper is the rather naive approach to debt as a financing source of R&D investment in the empirical investment literature. I focus on long-term relational debt based onits appealing contractual properties and discover a debt overhang effect for the relationship between additional long-term debt and R&D investment. I augment an error correction accelerator-profit specification to include changes in long-term debt as a transitory determinant of R&D investment as has been done with internal finance previously. Firms with previous period debt levels around 0.60 display a positive relationship between additional long-term debt and R&D investment.
Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2009. , 55 p.
CESIS Working Paper Series in Economics and Institutions of Innovation, 174
Econometrics, Financial Economics, Financial Markets, R&D, Financing Constraints
IdentifiersURN: urn:nbn:se:kth:diva-70058OAI: oai:DiVA.org:kth-70058DiVA: diva2:485799
QC 201202132012-02-132012-01-302012-02-13Bibliographically approved