Strategic growth option, uncertainty, and R&amp;D investment

Vo, Lai Van; Le, Huong Thi Thu

doi:10.1016/j.irfa.2017.03.002

Cited by 122 publications

(43 citation statements)

References 36 publications

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“…As such, firms have difficulty funding R&D activities by using external financing channels [16,20,23]; even if firms' R&D activities receive external, indirect support through financing or loans, this depends on their financial health. Thus, a firm's innovation is significantly correlated with its cash holding ratio, sales volume, and profitability [17]. R&D investment also depends on cash flow or stock issues and is constrained by external financing resources [16].…”

Section: Corporate Financial Capability Impacting Randd Investmentmentioning

confidence: 99%

“…Additionally, internal cash flows are the main source of R&D investment [16], and R&D intensity is positively related to cash flow [31,32]. There are three important firm-level indicators for asset liquidity and internal cash flow: (a) the total assets turnover ratio (AT), defined as the ratio of sales to average total assets; (b) accounts receivable turnover ratio (ART), defined as the ratio of sales to average accounts receivable; and (c) cash flow rate (CFR), defined as the cash flow from operations scaled by total assets [16,17,33].…”

Section: Corporate Financial Capability Impacting Randd Investmentmentioning

confidence: 99%

“…The three most popular financial performance indicators used to measure current profitability are return on assets (ROA), return on sales (ROS), and return on equity (ROE) [26,28]. ROA is defined as the ratio of net income to total assets [10,33]; ROS is defined as the ratio of net income to sales [26,28]; ROE is defined as the ratio of net income to shareholders' equity [17,28]. The corporate R&D expenditure is relative to corporate profitability; but, it is not significantly related to abnormal returns of firms in American bio-pharmaceutical listed companies [39].…”

Section: Corporate Financial Capability Impacting Randd Investmentmentioning

confidence: 99%

“…Moreover, financial constraints would disappear in well-governed firms [62]. Vo and Le (2017) [17] considered that the effects of corporate governance structure on R&D investment are driven by certain financial indicators, such as profitability and cash flow. This leads to the following hypotheses for the second research question:…”

Section: Corporate Governance Structure Impacting Randd Investmentmentioning

confidence: 99%

“…Moreover, they are not independent of one another, and their interaction can have a complex impact on a firm's R&D intensity. Driver and Guedes (2012) [47] argued that this interactive effect of governance and cash flow on R&D has not previously been investigated in R&D investment studies, and Vo and Le (2017) [17] echoed that the effects of corporate governance structure on R&D investment are driven by some financial capability indicators, such as profitability and cash flow. Thus, the effect mechanism of governance structure on R&D intensity constitutes a complex problem.…”

Section: The Interaction Effect Between Corporate Financial Capabilitmentioning

confidence: 99%

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Corporate Governance Structure, Financial Capability, and the R&D Intensity in Chinese Sports Sector: Evidence from Listed Sports Companies

2019

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Innovations are the foundation of an enterprise's sustainable development, which is particularly important for sports firms in an evolving Chinese sport industrial environment. Analyzing publicly-listed sports firms on The New Third Board (NTB) in China, this study examined the influence of corporate financial capability and corporate governance structure on firms' R&D intensity through a series of multiple regression models. Findings revealed that corporate financial capability is an important determinant of R&D intensity, and corporate governance structure has a small but meaningful effect on R&D intensity. Specifically, for Chinese sports firms, several financial capability indicators, such as return on equity, accounts receivable turnover, assets turnover, and profit growth rate, have positive relationships with R&D intensity; however, other financial capability indicators, such as leverage and cash flow, have negative relationships with R&D intensity. Limited evidence was found to support the notion that corporate governance significantly influences R&D intensity, although sports firms with good governance mechanisms are more likely to increase the positive effects of financial capabilities on R&D intensity while decreasing the negative effects. Discussions were centered on planning and executing R&D activities in sports companies.

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Section: Corporate Financial Capability Impacting Randd Investmentmentioning

confidence: 99%

Section: Corporate Financial Capability Impacting Randd Investmentmentioning

confidence: 99%

Section: Corporate Financial Capability Impacting Randd Investmentmentioning

confidence: 99%

Section: Corporate Governance Structure Impacting Randd Investmentmentioning

confidence: 99%

Section: The Interaction Effect Between Corporate Financial Capabilitmentioning

confidence: 99%

See 3 more Smart Citations

Corporate Governance Structure, Financial Capability, and the R&D Intensity in Chinese Sports Sector: Evidence from Listed Sports Companies

2019

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The interplay of cash flow uncertainty and firm life cycle on sustainability disclosure

Shiljas,

Kumar

2024

Bus Strat Env

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This study investigates the role of cash flow uncertainty and firm life cycle on sustainability disclosures using environmental, social and governance (ESG) disclosure score data. We conduct our analysis on a sample of 190 Indian firms for a period of 12 years from 2010 to 2021. Drawing upon the real‐option theory and organisational‐inertia theory, we document a negative impact of cash flow uncertainty and firm life cycle on a firm's commitment to disclose sustainability information. We also find a significant impact of managerial risk inclination and risk tolerance at the firm level in moderating the above relationships. Our findings can help managers equip themselves to meet the challenges of sustainability commitments during cash flow constraints and firm life‐cycle transitions. Moreover, our results can also help policymakers in assessing the need to enforce sustainability disclosures depending on the hurdles confronted by a firm.

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Patented innovation and left‐tail risk: Evidence from China

Jia,

Yang,

Zhou

et al. 2024

Int. J Fin Econ

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This study investigates the impact of patented innovation on the left‐tail risk of stock price, measured as the 1% value at risk (VaR) and expected shortfall (ES). Using the sample of all listed firms in the Chinese A‐share market from 2007 to 2020, we find that the quantity and quality of patents significantly decrease left‐tail risk. Second, the effect is more pronounced for firms in regions with patent pledge systems or stronger intellectual property rights protection. Short‐selling constraints and the engagement of retail investors hinder patented innovation from reducing left‐tail risk. Third, we further explore the mechanisms and find that patented innovation enhances financial performance, mitigates financial constraints, and attracts long‐term institutional investors, thereby decreasing left‐tail risk.

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Strategic growth option, uncertainty, and R&D investment

Cited by 122 publications

References 36 publications

Corporate Governance Structure, Financial Capability, and the R&D Intensity in Chinese Sports Sector: Evidence from Listed Sports Companies

Corporate Governance Structure, Financial Capability, and the R&D Intensity in Chinese Sports Sector: Evidence from Listed Sports Companies

The interplay of cash flow uncertainty and firm life cycle on sustainability disclosure

Patented innovation and left‐tail risk: Evidence from China

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