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Influence of Cross-Listing on the Relationship between Financial Leverage and R&D Investment: A Sustainable Development Strategy

Sustainability, 2021-09, Vol.13 (18), p.10341 [Peer Reviewed Journal]

2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2071-1050 ;EISSN: 2071-1050 ;DOI: 10.3390/su131810341

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  • Title:
    Influence of Cross-Listing on the Relationship between Financial Leverage and R&D Investment: A Sustainable Development Strategy
  • Author: Yang, Chi-Lin ; Lai, Jung-Ho
  • Subjects: Bankruptcy ; Brand loyalty ; Competition ; Corporate debt ; Costs ; Debt financing ; Financial leverage ; Funding ; Investments ; R&D ; Research & development ; Research & development expenditures ; Stock exchanges ; Stockholders ; Strategy ; Sustainability ; Sustainable development
  • Is Part Of: Sustainability, 2021-09, Vol.13 (18), p.10341
  • Description: Investment in research and development (R&D) is an important sustainable strategy for firms in developing unique products to own their differentiation and competitive advantages. Financial leverage is influential in R&D investment. However, previous studies identified different relationship between financial leverage and R&D investment. This study revisits this puzzle from a unique perspective that targets firms undertaking international cross-listings. This specification allows us to test whether firms are willing to prioritize R&D funding when debt capacity is enhanced. This is a new perspective that has never been explored in the relationship between debt financing and R&D investment. We find that the launch of cross-listing significantly increases the level of firm financial leverage, which is followed by a significant increase in corporate investment in R&D. The aggressive strategy of cross-listing firms that enhance financial leverage to support more investment in R&D further significantly influences their industrial rivals to increase investment in R&D as a responding strategy. Overall, these results show that firms exploit the timing of international cross-listing to increase their leverage to further fund R&D, which also stimulates an intra-industry contagion effect. Our findings suggest a new viable path for funding R&D that carries important implications for corporate sustainability.
  • Publisher: Basel: MDPI AG
  • Language: English
  • Identifier: ISSN: 2071-1050
    EISSN: 2071-1050
    DOI: 10.3390/su131810341
  • Source: GFMER Free Medical Journals
    ROAD: Directory of Open Access Scholarly Resources
    ProQuest Central
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