Debt, Ownership Structure, and R&D Investment: Evidence from Japan

Author Name ARIKAWA Yasuhiro  (Graduate School of Finance, Accounting and Law, Waseda University / WCFIA, Harvard University) /KAWANISHI Takuya  (Graduate School of Law, Waseda University / Research Assistant, RIETI) /MIYAJIMA Hideaki  (Faculty Fellow, RIETI / Graduate School of Commerce, Waseda University / Waseda Institute for Advanced Study)
Creation Date/NO. March 2011 11-E-013
Research Project The Frontier of Corporate Governance Analysis: Evolution of the corporate system in Japan and the impact of the world financial crisis
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Financial factors and ownership structure are both part of the determinants of corporate R&D investment. Considering listed firms in the R&D intensive industries during the 2000s, this paper examines whether financial factors and ownership structure explain R&D investment in Japan. Following the methodology of Brown et al. (2009), which extends the dynamic investment model of Bond and Maghir (1994) to R&D investment, we find that only small, young firms mainly listed on new emerging markets face financial constraints. We also find that large firms finance R&D investment partly from debt. For firms with relatively limited assets, however, higher leverage leads to lower R&D investment. Finally, we find no evidence that large shareholdings by foreign investors enforce myopic behavior on firms in R&D intensive industries.