Tangible and intangible investment in corporate finance

Zhao Shuangling, Cao Guohua and Wu Lijuan

The North American Journal of Economics and Finance, 2019, vol. 50, issue C

Abstract: Research and development (R&D) investment has increased dramatically in recent decades but not been explored extensively implications for the firms’ liquidity management. In this paper, we propose a dynamic model of a financially constrained firm about R&D and physical investment, financing and risk management, and then analyze the market-timing decisions about the corporate liquidation, external equity, credit debt and payout. And the comparative static analysis about R&D is also given. We find that the firm value changes sharply with the obsolescence rate of R&D, the volatility of R&D stocks will decrease the firm value-capital ratio, and R&D investment is more impressionable to financing frictions than physical investment. Our model and analysis provide the new insight into the investment and financing of intangible capital.

Keywords: R&D investment; Physical investment; q theory; Market timing; Risk management (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818300081

DOI: 10.1016/j.najef.2019.100991

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