Do firms use credit lines to support investment opportunities?: Evidence from success in R&D

Jiyoon Lee

Journal of Empirical Finance, 2022, vol. 69, issue C, 1-14

Abstract: I provide empirical evidence that firms use credit lines to support investment opportunities that are available in good times, consistent with Lins et al., 2010’s survey findings. Employing patent grants as a proxy for R&D success, I find that innovative firms draw down credit lines to finance R&D success-driven capital expenditures. Credit-line drawdowns following R&D success are more pronounced in firms that depend heavily on external financing and incur large capital expenditures after R&D success. The results cannot be explained by credit-supply effects or time-varying state-level omitted variables. Overall, the results suggest that credit lines help firms take advantage of investment opportunities that are gained by R&D success.

Keywords: Credit lines; Revolving credit; Patents; R&D success; Capital expenditure; Investment opportunities (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:69:y:2022:i:c:p:1-14

DOI: 10.1016/j.jempfin.2022.08.001

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