Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215677 
Year of Publication: 
2020
Series/Report no.: 
ZEW Discussion Papers No. 20-018
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
This paper tests for the sensitivity of R&D to financing constraints conditional on restrictions in external financing. Financing constraints of firms are identified by an exogenously calculated rating index. Restrictions in external financing are determined by (i) the specific time period (crisis vs. non-crisis) and (ii) the balance sheet strength of the firm's main bank in terms of bank capital. Results of difference-in-differences estimations utilizing three time periods: 2002-2006 (pre-crisis) 2007-2009 (crisis) and 2010-2012 (post-crisis) support the theoretical prediction that financing constraints affect R&D. Moreover, we find that the effect of firm financing constraints is more intense (i) in times of stress on financial markets and (ii) when the firm faces restrictions in external financing. Additionally, our results indicate that on average the effect does not persist over time.
Subjects: 
R&D investment
financing constraints
credit rating
financial crisis
bank capital
external financing of innovation
JEL: 
G01
G21
G24
G30
O16
O30
O31
O32
Document Type: 
Working Paper

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