R&D, Agency Costs and Capital Structure: International Evidence
46 Pages Posted: 9 Dec 2003
Date Written: October 31, 2003
We examine the impact of R&D intensity and agency costs on the value of firms across 13 economies. Unsurprisingly, R&D adds value while high agency costs reduce value. What is surprising is that R&D adds value even when agency costs are high. We are able to show that in those firms, where agency costs are high and R&D intensity is high, the debt control hypothesis is at work. In contrast to the stylized fact of high R&D firms having low levels of debt, these firms have higher levels of debt.
Keywords: R&D, Agency Costs, Capital Structure
JEL Classification: D80, G32, O30, O57
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