Working capital and R&D smoothing: evidence from the Tel Aviv stock exchange

Ahmad Alkhataybeh

Journal of Applied Economics, 2021, vol. 24, issue 1, 91-102

Abstract: This paper proposes new tests for financing constraints on R&D investment by directly examining the role played by working capital in smoothing the R&D expenditures of firms listed on the Tel Aviv stock exchange. It emphasizes the importance of working capital, not only for use but also as a source of funds. The findings offer new evidence for why levels of liquidity are important for R&D-intensive firms. Working capital alleviates the effects of transient finance shocks on the level of R&D, thereby averting the high adjustment costs that accompany changes in R&D.

Date: 2021
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DOI: 10.1080/15140326.2021.1877599

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