R&D investment under financing constraints
Marek Giebel and
No 20-018, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research
This paper tests for the sensitivity of R&D to financing constraints conditional on restrictions in external financing. Financing constraints of firms are identified by an exogenously calculated rating index. Restrictions in external financing are determined by (i) the specific time period (crisis vs. non-crisis) and (ii) the balance sheet strength of the firm's main bank in terms of bank capital. Results of difference-in-differences estimations utilizing three time periods: 2002-2006 (pre-crisis) 2007-2009 (crisis) and 2010-2012 (post-crisis) support the theoretical prediction that financing constraints affect R&D. Moreover, we find that the effect of firm financing constraints is more intense (i) in times of stress on financial markets and (ii) when the firm faces restrictions in external financing. Additionally, our results indicate that on average the effect does not persist over time.
Keywords: R&D investment; financing constraints; credit rating; financial crisis; bank capital; external financing of innovation (search for similar items in EconPapers)
JEL-codes: G01 G21 G24 G30 O16 O30 O31 O32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-ent, nep-ino, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20018
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