Capital Structure and R&D: Empirical Evidence from China and USA

Abstract

This paper focuses on how the capital structure of enterprises affects their R&D intensity, introduces the asset-liability ratio to compare the capital structure of China and the United States, and introduces the tradable shares to compare the capital structure of state-owned enterprises and non-state-owned enterprises. The final result is that the asset-liability ratio and R&D intensity are negatively correlated in both China and America, and this negative relationship will be weakened in China. The existence of tradable shares increases the R&D intensity, ceteris paribus, in SOEs, the negative correlation between capital structure and R&D intensity is far greater than that of private enterprises. Based on the fact that under the modern business era, an enterprise’s innovation capability is closely related to its core competitiveness, and at the same time, the promotion speed of innovation ability depends on the scale of R&D investment, and the relationship between capital structure and enterprise R&D investment can be deduced from this paper.