Influence of Cross-Listing on the Relationship between Financial Leverage and R&D Investment: A Sustainable Development Strategy

Abstract

Investment in research and development (R&D) is an important sustainable strategy for firms in developing unique products to own their differentiation and competitive advantages. Financial leverage is influential in R&D investment. However, previous studies identified different relationship between financial leverage and R&D investment. This study revisits this puzzle from a unique perspective that targets firms undertaking international cross-listings. This specification allows us to test whether firms are willing to prioritize R&D funding when debt capacity is enhanced. This is a new perspective that has never been explored in the relationship between debt financing and R&D investment. We find that the launch of cross-listing significantly increases the level of firm financial leverage, which is followed by a significant increase in corporate investment in R&D. The aggressive strategy of cross-listing firms that enhance financial leverage to support more investment in R&D further significantly influences their industrial rivals to increase investment in R&D as a responding strategy. Overall, these results show that firms exploit the timing of international cross-listing to increase their leverage to further fund R&D, which also stimulates an intra-industry contagion effect. Our findings suggest a new viable path for funding R&D that carries important implications for corporate sustainability.

The role of corporate governance and reputation in the disclosure of corporate social responsibility and firm performance

“…Similarly, this study also evidenced an inconsistency when we investigated the direct effect of CSRD on Tobin Q when excluding the mediating effect of CR. These study findings are consistent with Yang and Lai [ 74 ] and Saeidi et al [ 45 ], who investigate the mediating effect of CR on the link between CSR and firm performance. In contrast to the research studies described above that draws primarily from cross-sectional data, our study draws upon longitudinal data gathered from a large sample of global firms.…”

“… CEO duality A dummy variable is used for CEO duality, where 1 indicates the CEO is also the board chair and 0 indicates the opposite [ 81 ]. Leverage We calculated the financial leverage by the ratio of debt/equity [ 74 , 82 ]. Size Calculated with the total assets and employee numbers [ 83 ].…”

Influencing Factors of Enterprise R&D Investment: Post-Subsidy, Sustainability, and Heterogeneity

“…First, due to the agglomeration of high-tech enterprises in different regions, there exists in the quantity and sustainability of R&D investment of enterprises an obvious imbalance among regions. Compared with other regions, regions where high-tech enterprises gather are more impressive in the amount and sustainability of R&D investment, which may be closely related to regional support policies [23], such as more subsidies in the high-tech development zone and competitor pressure [24]. Hypotheses 1 and 4a are verified, which is consist with the previous pre-subsidy study [9].…”

Commercializing a Technology use Global Business Strategy approach: A Lesson Learned from HVAC Companies

“…Targeting the right market with the right products, providing services, and developing technology is the core of technology-based business continuity. R&D investment is the one important sustainability strategy for the company to develop a unique product as a character and as a force to gain a competitive advantage (Yang and Lai 2021). R&D investment is important to support and development in high-tech industries (Liu et al 2019).…”