We examine how leverage affects corporate research and development (R&D) intensity, as well as examine the impact of R&D on firm value in South Korea, a country in which corporate-funded R&D intensity is one of the highest in the world. Among our main results, we find that growth opportunities have a positive effect on R&D intensity, while leverage has a negative effect on R&D intensity. When leverage is at an extremely high level, the relationship between growth opportunities and R&D intensity turns from positive to negative. Using instrumental variables, we find that R&D generates an increase in firm value.
- Firm value
- South Korea