Campus Units

Finance

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

1-2013

Journal or Book Title

Journal of Banking & Finance

Volume

37

Issue

1

First Page

159

Last Page

173

DOI

10.1016/j.jbankfin.2012.08.024

Abstract

We examine the intersection between corporate divestitures of tangible assets and investment in intangible capital (R&D) to provide new tests for the impact financing constraints have on real activity. A positive R&D sensitivity to asset sale proceeds indicates binding financing constraints since cash inflows from tangible asset sales are negatively correlated with productivity shocks and not otherwise connected to intangible investment via non-financial channels. Using a variety of estimation approaches, we document a strong, positive link between cash inflows from fixed asset sales and corporate R&D investment, but only among firms most likely facing binding financing constraints. These results offer robust evidence that financing frictions impact the increasingly important yet understudied intangible corporate investments that drive innovative activity, and they highlight a previously unexplored but potentially valuable use of proceeds from fixed asset divestitures.

Comments

This is an accepted manuscripts of an article from Journal of Banking & Finance, 2013 37(1); 159-173. DOI: 10.1016/j.jbankfin.2012.08.024. Posted with permission.

Copyright Owner

Elsevier B.V.

Language

en

File Format

application/pdf

Published Version

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