What Matters More in the R&D and Capital Expenditures Financing by Japanese Firms: Multinationality or Bank Affiliation?

Abstract

Using a Japanese sample of 3024 firm-year observations in the period 2000 to 2002, we investigate the relation between cash flow, debt, investment and performance according to whether the firm is multinational (versus domestic), keiretsu (versus independent) or both multinational and keiretsu. The results show that cash flow is the principal source of financing of R&D and capital investment. The presence of a main bank in Japanese firms does not alleviate the financial constraint problem and alter the effect of both R&D and capital investment on performance.

Keywords: R&D, Capital expenditures, Keiretsu, Multinational, Financial constraints

JEL Classification: G22, G32, G34