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R & D Intensity and Dividend Policy: Evidence from South Korea’s Biotech Firms

Namryoung Lee () and Jaehong Lee ()
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Namryoung Lee: School of Business, Korea Aerospace University, Goyang 10540, Korea
Jaehong Lee: College of Business, Sangmyung University, Seoul 03016, Korea

Sustainability, 2019, vol. 11, issue 18, 1-21

Abstract: In this paper, we examine the relation between a firm’s research and development (R & D) intensity and dividend payout policy with a focus on biotech firms in a sample of 18,253 firm-year observations in South Korea. We find that biotech firms’ R & D intensity is negatively related to dividend payout. Furthermore, for biotech firms, increased internal cash holding accomplished via a lower dividend policy is positively associated with long-term corporate value. In particular, this study reports that the relation between biotech firms’ cash holding and corporate firm value is significantly positive in firms with high stock dividends. Moreover, it shows that non-biotech firms in the maturity stage of the corporate lifecycle tend to distribute cash dividends, a practice that is relatively uncommon among biotech firms in an R & D steady state.

Keywords: R & D intensity; South Korea’s biotech firms; cash holding; dividend policy; firm value (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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