(A Study on the Relationship Between R&D Expenditures and Firm Debt Level: The Example of The BIST Industrial Index)

Abstract

Purpose – In this study, the effects of company debts on R&D investments are investigated. Design/methodology/approach – The financial data of 73 firms providing data continuity that listed in BIST Industrial Index between 2009-2016 are analyzed. In the analysis of the data, Pooled OLS method and the Random Effect are employed by taking account of the Hausman test outcome. Findings – According to the results of pooled OLS, there was a negative significant effect in % 5 level is determined between R&D expenditures with Long Term Liabilities and Operating Profit Margin variables. However, according to the results of the Hausman test, it was found that the foreign resources had random effects on R&D expenditures. According to the results of Random Effect model, it was observed that the negative effect of Long Term Liabilities and Operating Profit Margin lost its significance. In addition, the positive effect of the Ratio of Debts to Sales and Net Cash Flows on R&D expenditures is remarkable. Discussion – According to the pooled OLS method, there was a negative significant relationship between the debt levels and R&D expenditures of the firms, but no significant relationship was found between the debt level and R&D expenditures according to Panel Data Analysis. Therefore, while H0 hypothesis was rejected and H1 hypothesis was accepted according to Pooled OLS method, H1 hypothesis could not be accepted and H0 hypothesis could not be rejected in Panel Data Analysis.