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The impact of R&D intensity, financial constraints, and dividend payout policy on firm value

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  • Kim, JooMan
  • Yang, Insun
  • Yang, Taeyong
  • Koveos, Peter

Abstract

In this paper, we show that the effect of R&D on the value of financially constrained firms with dividend payout policy is much stronger than that on the value of firms without dividend payout policy. It is expected that financially constrained firms would tend to avoid paying out dividends. Nevertheless, recent studies on dividends show that the dividend policy of financially constrained firms could be utilized positively to provide a positive signal to the financial market. By extending those studies, our results show that the R&D of financially constrained firms with dividend payout policies have a significantly more positive impact on firm value than financially constrained non-dividend payers, and that the managers of financially constrained firms have incentives to use dividend payments to provide a positive impact of R&D performance on their firm value. We suggest that the dividend policy of R&D firms with financial constraints could be utilized to provide a positive signal to the financial market.

Suggested Citation

  • Kim, JooMan & Yang, Insun & Yang, Taeyong & Koveos, Peter, 2021. "The impact of R&D intensity, financial constraints, and dividend payout policy on firm value," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320316160
    DOI: 10.1016/j.frl.2020.101802
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    More about this item

    Keywords

    R&D effects; Firm value; Financial constraints; Dividend payout policy;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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