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

Abstract

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.