TITLE:
Financial Constraints, Financing Channels and Corporations’ R&D Investment—Based on Development Phase and Heterogeneity of Operating Cash Flow
AUTHORS:
Xuhui Shi, Tao Wu
KEYWORDS:
R&D Investment, Financial Constraints, Financing Channels, Growth Enterprise Market (GEM)
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.4 No.5,
May
30,
2016
ABSTRACT: R&D investment is an important corporate data that government needs to pay attention to especially when Chinese economy is facing essential transition. Considering the diversity of R&D phase and cash flow condition, we divide the corporations listed in the growth enterprise market (GEM) into four types and discuss corporations’ preferred channels to finance R&D investment and if each type of corporations faces identical financial constraints. Using panel data and q model, our analysis proves that listed corporations in GEM are facing financial constraints; operating cash flow is still the main capital source of R&D investment. If cash flow was favorable, corporations whose R&D project is in development phrase would prefer to finance R&D investment by debt and equity channels, bearing more loosely financial constraints. If cash flow was deficient, the channel of debt financing would no longer support R&D, and corporations in development phrase would more rely on equity financing, while corporations in research phrase would just maintain a low level of R&D investment by cash in hold.