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Technology and financial structure: are innovative firms different?

Aghion, P.; Bond, S.; Klemm, A.; Marinescu, I.; (2004) Technology and financial structure: are innovative firms different? Journal of the European Economic Association , 2 (2-3) pp. 277-288. 10.1162/154247604323067989. Green open access

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Abstract

We use data on publicly traded U.K. firms to investigate whether financing choices differ systematically with R&D intensity. As well as looking at a balance sheet measure of the debt/assets ratio, we also consider the probability of raising finance by issuing new equity, and the shares of bank debt and secured debt in total debt. We find a nonlinear relationship with the debt/assets ratio: firms that report positive but low R&D use more debt finance than firms that report no R&D, but the use of debt finance falls with R&D intensity among those firms that report R&D. We find a simpler relationship with the probability of issuing new equity: Firms that report R&D are more likely to raise funds by issuing shares than firms that report no R&D, and this probability increases with R&D intensity. The shares of bank debt and secured debt in total debt are both lower for firms that report R&D compared to those that do not, and tend to fall as R&D intensity rises. We discuss possible explanations for these patterns.

Type: Article
Title: Technology and financial structure: are innovative firms different?
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/154247604323067989
Publisher version: http://dx.doi.org/10.1162/154247604323067989
Language: English
Additional information: © 2004 The MIT Press
Keywords: Finance, financing, firm, R&D, shares, technology
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/17751
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