Asset specificity and a firm’s borrowing ability: an empirical analysis of manufacturing firms

Močnik, Dijana

doi:10.1016/s0167-2681(00)00166-9

Cited by 32 publications

(13 citation statements)

References 21 publications

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“…Furthermore, because R&D processes involve accumulation of intangible capital, i.e., capital that is hardly re‐deployable in alternative settings, such an investment has a low collateral value, thereby limiting the access to credit. Močnik (2001), using a sample of Slovene firms, finds support for the hypothesis that firms with a high level of specific, i.e., intangible, assets should be characterized by a lower debt/equity ratio.…”

Section: Theoretical Backgroundmentioning

confidence: 88%

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R&D INVESTMENT, CREDIT RATIONING AND SAMPLE SELECTION

Piga

Atzeni

2007

Bulletin of Econ Res

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We study whether R&D-intensive firms are liquidity-constrained, by also modeling their antecedent decision to apply for credit. This sample selection issue is relevant when studying a borrower-lender relationship, as the same factors can influence the decisions of both parties. We find firms with no or low R&D intensity to be less likely to request extra funds. When they do, we observe a higher probability of being denied credit. Such a relationship is not supported by evidence from the R&D-intensive firms. Thus, our findings lend support to the notion of credit constraints being severe only for a sub-sample of innovative firms. Furthermore, the results suggest that the way in which the R&D activity is organized may differentially affect a firms' probability of being credit-constrained.JEL classification: D45, G21, G32, E51

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Section: Theoretical Backgroundmentioning

confidence: 88%

“…It is also the case that the intangible nature of the investment in R&D makes it highly firm specific and hardly re‐deployable. Thus it may reduce a firm's borrowing ability (Močnik, 2001). However, the partnership in R&D implies risk sharing, which for such specific investments is favourably considered by the lender.…”

Section: Data Set and Modelmentioning

confidence: 99%

R&D INVESTMENT, CREDIT RATIONING AND SAMPLE SELECTION

Piga

Atzeni

2007

Bulletin of Econ Res

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“…Such reasons lead to asymmetry of information problems, like adverse selection and moral hazard (Jensen and Meckling, ; Stiglitz and Weiss, ), that might discourage external investors, whose assessment of the expected returns is less reliable than the internal assessment (Ughetto, ; Czarnitzki and Hottenrott, ; Takalo and Tanayama, ; Czarnitzki et al ., ). Moreover, the intangible nature of R&D hinders the use of collateral by innovative firms to secure their borrowing (Bester, ; Berger and Udell, ; Hubbard, ; Močnik, ; Ughetto, ).…”

Section: Some Key Issues In the Relationship Between Public Randd Subsimentioning

confidence: 99%

ASSESSING THE EFFECT OF PUBLIC SUBSIDIES ON FIRM R&D INVESTMENT: A SURVEY

Zúñiga‐Vicente

Alonso‐Borrego

Forcadell

et al. 2012

Journal of Economic Surveys

386

183

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This survey examines the empirical literature on the relationship between public R&D subsidies and private R&D investment over the past five decades. The survey reveals a considerable heterogeneity of empirical results that cannot be explained fully by methodological issues. We aim to provide further explanations of the possible causes of that heterogeneity. In particular, we emphasise a set of issues that, in our view, are critical to understanding the potential effect of public R&D subsidies on private R&D spending. Special attention is paid to the dynamic aspects and composition of firm R&D, the constraints faced by the firm (such as financial constraints), and the amount and source of public subsidies. None of these issues have been investigated in depth. We formulate a set of research assumptions to guide future empirical research in this field.

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“…Thus far the empirical literature has largely corroborated these predictions of the TCE capital structure theory (Titman and Wessels, 1988;Balakrishnan and Fox, 1993;Kochhar, 1996;Močnik 2001;Benmelech et al, 2005). However, if we compare the theory with other work in the field of TCE, we find that the basic logic has not been fully developed in particular with respect to the equity governance structure.…”

Section: Introductionmentioning

confidence: 75%

Corporate governance and transaction cost economics: A study of the equity governance structure

Saravia¹,

Saravia-Matus²

2016

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This paper examines the Transaction Cost Economics (TCE) theory of capital structure and finds that for the case of equity the usual TCE logic is not fully worked out. In particular, an analysis of the key issue of bilateral dependency between the firm and its shareholders is absent. To fill this gap in the literature, the paper further develops the theory of the equity governance structure by taking account of the concept of bilateral dependency over the lifecycle of the firm. The paper finds that, both theoretically and empirically, contractual hazards are indeed mitigated for the case of fast growing young firms which are dependent on shareholders to finance future growth. In contrast, for the case of mature firms, which in virtue of their large free cash flows are independent from shareholders, contractual safeguards are altered to the disadvantage of shareholders and consequently managerial discretion costs increase.

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Asset specificity and a firm’s borrowing ability: an empirical analysis of manufacturing firms

Cited by 32 publications

References 21 publications

R&D INVESTMENT, CREDIT RATIONING AND SAMPLE SELECTION

R&D INVESTMENT, CREDIT RATIONING AND SAMPLE SELECTION

ASSESSING THE EFFECT OF PUBLIC SUBSIDIES ON FIRM R&D INVESTMENT: A SURVEY

Corporate governance and transaction cost economics: A study of the equity governance structure

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