How does leverage affect R&D intensity and how does R&D intensity impact on firm value in South Korea?

Byung S. Min and Russell Smyth

Applied Economics, 2016, vol. 48, issue 58, 5667-5675

Abstract: We examine how leverage affects corporate research and development (R&D) intensity, as well as examine the impact of R&D on firm value in South Korea, a country in which corporate-funded R&D intensity is one of the highest in the world. Among our main results, we find that growth opportunities have a positive effect on R&D intensity, while leverage has a negative effect on R&D intensity. When leverage is at an extremely high level, the relationship between growth opportunities and R&D intensity turns from positive to negative. Using instrumental variables, we find that R&D generates an increase in firm value.

Date: 2016
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DOI: 10.1080/00036846.2016.1181836

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