The Effects of Future Capital Investment and R&D Expenditures on Firms' Liquidity

Christopher F. Baum; Mustafa Caglayan; Oleksandr Talavera

doi:10.1111/roie.12048

The Effects of Future Capital Investment and R&D Expenditures on Firms' Liquidity

Christopher F. Baum^*, Mustafa Caglayan, Oleksandr Talavera

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

13 Citations (Scopus)

Abstract

The paper explores factors that lead to accumulation or decumulation of firms' cash reserves. In particular, the paper empirically examines whether additional future fixed capital and R&D investment expenditures induce firms to change their liquidity ratio while considering the role of market imperfections. Implementing a dynamic framework on a panel of US, UK, and German firms, it is found that firms in all three countries make larger adjustments to cash holdings when they plan additional future R&D rather than fixed capital investment expenditures. This behavior is particularly prevalent among financially constrained firms.

Original language	English
Pages (from-to)	459-474
Number of pages	16
Journal	Review of International Economics
Volume	21
Issue number	3
DOIs	https://doi.org/10.1111/roie.12048
Publication status	Published - Aug 2013

ASJC Scopus subject areas

Geography, Planning and Development
Development

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1111/roie.12048

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The Effects of Future Capital Investment and R&D Expenditures on Firms' Liquidity

Abstract

ASJC Scopus subject areas

UN SDGs

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