R&D Investments and Credit Lines

60 Pages Posted: 29 Oct 2015 Last revised: 6 Oct 2017

See all articles by Yilmaz Guney

Yilmaz Guney

University of Hull

Ahmet Karpuz

Loughborough University - School of Business and Economics

Neslihan Ozkan

University of Bristol - School of Economics, Finance and Management, UK

Date Written: July 28, 2017

Abstract

Using data for 939 publicly listed firms from 17 European countries over the period from 2004 to 2013, we investigate the effect of used credit lines on R&D investments, controlling for other determinants of R&D investments, i.e., cash flows, cash holdings, sales growth, equity financing, and Tobin’s Q. Our estimation results, based on the system-GMM method, show that used credit lines have a positive and significant impact on R&D investments. In addition, we find that this impact is more pronounced for small and young firms than for large and mature firms. These results show that firms use credit lines as part of their liquidity management tools for supporting their R&D investments. Finally, we provide evidence that European firms in bank-based countries increased their use of credit lines for financing their R&D investments during the financial crisis of 2007-2009, while the link between R&D investments and used credit lines became weaker during the European sovereign debt crisis of 2010-2013..

Keywords: R&D investment, revolving credit, financial crisis

JEL Classification: G32, O32

Suggested Citation

Guney, Yilmaz and Karpuz, Ahmet and Ozkan, Neslihan, R&D Investments and Credit Lines (July 28, 2017). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2681233 or http://dx.doi.org/10.2139/ssrn.2681233

Yilmaz Guney

University of Hull ( email )

Hull, HU6 7RX
United Kingdom

HOME PAGE: http://https://www.hull.ac.uk/faculties/fblp/hubs.aspx

Ahmet Karpuz

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

Neslihan Ozkan (Contact Author)

University of Bristol - School of Economics, Finance and Management, UK ( email )

United States

HOME PAGE: http://www.bristol.ac.uk/accounting/staff/ozkan.html

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