 The determinants of R&D smoothing with asset sales: Evidence from R&D-intensive firms in ChinaDuan Liu, Zhiyuan Li, Hongbo He and Wenxuan Hou International Review of Economics & Finance, 2021, vol. 75, issue C, 76-93 Abstract: Research and development (R&D)-intensive firms have strong incentives to maintain a smooth path for their R&D investments; otherwise, they will incur high adjustment costs. Examining data covering 2009 to 2016, we find that Chinese R&D-intensive firms, especially those with high innovation efficiency, tend to sell operating and financial assets to protect their value-enhancing R&D investments. However, financial constraints have adverse impacts on R&D smoothing with asset sales unless the firms have high innovation efficiency. The results suggest that innovation efficiency offers R&D-intensive firms, even financially constrained ones, a strong motivation to covert asset sales proceeds into R&D inputs, as the proceeds from asset sales provide a less-costly substitute for external financing. Given the importance of R&D for economic growth and the limited external financing opportunities in emerging capital markets like China, our findings reveal new insights regarding R&D financing. Keywords: R&D financing; Asset sale; Innovation efficiency; Financial constraint (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:75:y:2021:i:c:p:76-93 DOI: 10.1016/j.iref.2021.03.013 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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