Scandinavian Working Papers in Economics
Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies
No 174: Finance and R&D Investments - is there a debt overhang effect on R&D investments?
Gustav Martinsson ()
Additional contact information
Gustav Martinsson: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Abstract: 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 on its 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.
Keywords: Econometrics; Financial Economics; Financial Markets; R&D; Financing Constraints
65 pages, March 25, 2009
Full text files
cesiswp174.pdf
- Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies
- Home page for this series
Questions (including download problems) about the papers in this series should be directed to Vardan Hovsepyan ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2024-02-21 12:08:39.