Cash holdings and R&D smoothing
dc.contributor.author | Brown, James | |
dc.contributor.author | Petersen, Bruce | |
dc.contributor.author | Brown, James | |
dc.contributor.department | Finance | |
dc.date | 2018-02-19T02:25:32.000 | |
dc.date.accessioned | 2020-06-30T03:57:58Z | |
dc.date.available | 2020-06-30T03:57:58Z | |
dc.date.copyright | Sat Jan 01 00:00:00 UTC 2011 | |
dc.date.issued | 2011-06-01 | |
dc.description.abstract | <p>The sharp increase in R&D investment in recent decades has important but unexplored implications for corporate liquidity management. Because R&D has high adjustment costs and is financed with volatile sources, it is very expensive for firms to adjust the flow of R&D in response to transitory finance shocks. The main contribution of this paper is to directly examine whether firms use cash reserves to smooth their R&D expenditures. We estimate dynamic R&D models and find that firms most likely to face financing frictions rely extensively on cash holdings to smooth R&D. In particular, our estimates suggest that young firms used cash holdings to dampen the volatility in R&D by approximately 75% during the 1998–2002 boom and bust in equity issues. Firms less likely to face financing frictions appear to smooth R&D without the use of costly cash holdings. Our findings provide new insights into the value of liquidity and the financing of intangible investment, and suggest that R&D smoothing with cash reserves is now important for understanding cash management for a substantial fraction of publicly traded firms.</p> | |
dc.description.comments | <p>This is accepted manuscript from <em>Journal of Corporate Finance</em>, 2011, 17(3); 694-709. DOI: <a href="http://dx.doi.org/10.1016/j.jcorpfin.2010.01.003" target="_blank">10.1016/j.jcorpfin.2010.01.003</a>. Posted with permission.</p> | |
dc.format.mimetype | application/pdf | |
dc.identifier | archive/lib.dr.iastate.edu/finance_pubs/17/ | |
dc.identifier.articleid | 1010 | |
dc.identifier.contextkey | 11047611 | |
dc.identifier.s3bucket | isulib-bepress-aws-west | |
dc.identifier.submissionpath | finance_pubs/17 | |
dc.identifier.uri | https://dr.lib.iastate.edu/handle/20.500.12876/37326 | |
dc.language.iso | en | |
dc.source.bitstream | archive/lib.dr.iastate.edu/finance_pubs/17/2011_BrownJR___CashHoldingRDSmoothing.pdf|||Fri Jan 14 21:11:59 UTC 2022 | |
dc.source.uri | 10.1016/j.jcorpfin.2010.01.003 | |
dc.subject.disciplines | Business Law, Public Responsibility, and Ethics | |
dc.subject.disciplines | Corporate Finance | |
dc.subject.disciplines | Finance and Financial Management | |
dc.subject.disciplines | Strategic Management Policy | |
dc.subject.keywords | Cash holdings | |
dc.subject.keywords | R&D | |
dc.subject.keywords | Value of liquidity | |
dc.subject.keywords | Investment smoothing | |
dc.title | Cash holdings and R&D smoothing | |
dc.type | article | |
dc.type.genre | article | |
dspace.entity.type | Publication | |
relation.isAuthorOfPublication | ac67180a-d497-41fc-beaf-75e4f0244de3 | |
relation.isOrgUnitOfPublication | e2432527-158f-465f-8301-f4ab4c262f9b |
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