Debt, ownership structure, and R&D investment : evidence from Japan

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.