A Discussion On The Effect Of Equity Financing Factor To R&D Investment

The development of science and technology has become the main source of our country's economic development since 21th century.And meanwhile,R&D activity plays a very important role in improving the company's core competence and promotes economic development.Though China's listed company which are the most important subject of R&D activity have invested more and more in R&D activity, there are still wide gap between our country and developed country.And one important factor of the restrictive factors of our listed companies'R&D investment is financing.Especially,since our listed company has equity financing preference,the effect of equity financing to R&D investment is more important than debt financing. So this paper focuses on the effect of equity financing to R&D investment.This paper first gives a theory analysis on the effect,then select annual report data of China's listed company on 2003-2007 based on the description of the situation of our listed company's equity financing and R&D investment.And we use capital /assets for equity financing and R&D intensity for R&D investment.At last,this paper does empirical research about the correlation of equity financing and R&D investment by choosing influential Tobin's Q,cash flow and growth ability as control variables. Then we analyze separately by dividing the companies into two groups according to growth ability and time to market.We have found that:in the overall sample,the regression coefficient of equity financing is positive and significant,so the equity financing and R&D investment have significant positive correlation in the large-scale companies.In high growth ability companies,equity financing and R&D investment have significant and positive correlation which doesn't exist in low growth ability companies.In new companies, equity financing and R&D investment have significant and positive correlation which doesn't exist in old companies.Finally,this paper makes some recommendations in order to solve financing problems of R&D and improve R&D investment.First,promote the marketization of bond market to increase financing channel of innovative company.Second,improve the information disclosure system of listed company to decrease information asymmetry and moral hazard.Third,improve government purchase.Four,enlarge stock market,create chances of equity financing for more companies.