R&D, Agency Costs and Capital Structure: International Evidence

46 Pages Posted: 9 Dec 2003

See all articles by Robert D. Brooks

Robert D. Brooks

Monash University; Financial Research Network (FIRN)

Sinclair Davidson

RMIT University

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

Suggested Citation

Brooks, Robert Darren and Davidson, Sinclair, R&D, Agency Costs and Capital Structure: International Evidence (October 31, 2003). Available at SSRN: https://ssrn.com/abstract=465620 or http://dx.doi.org/10.2139/ssrn.465620

Robert Darren Brooks

Monash University ( email )

Wellington Road
Clayton, Victoria 3168

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

Sinclair Davidson (Contact Author)

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000

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