Innovation, financing and financial markets: analysis of the relationships between investment in R&D, capital structure and accounts information
Abstract
This working paper aims to determine what restrictions exist in terms of financing businesses' research and development (R&D) projects and analyse the causes. The results of the research show that: 1) there are financial restrictions on making investments in R&D and these are seen in companies' need to use internal resources or short-term third-party funding; 2) these restrictions emerge, fundamentally, as the result of two factors: the imbalance between the economic characteristics of investments in R&D and the behaviour of financial agents in the capitals markets, and the existence of information asymmetries between managing and financing agents, and 3) production by companies of more accounting information on the R&D undertaken leads to an improved valuation of the company in financial markets and, thus, the assignment of funds to innovation processes.
Keywords
financial market; innovation; R&D; restriction
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