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Article: Intellectual capital and financing decisions: Evidence from the U.S. patent data

TitleIntellectual capital and financing decisions: Evidence from the U.S. patent data
Authors
KeywordsCapital structure
Default
Intellectual capital
Patent-based metrics
R&D-based metrics
Issue Date2011
PublisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.org
Citation
Management Science, 2011, v. 57 n. 10, p. 1861-1878 How to Cite?
AbstractThis paper develops a real options model to understand two distinct roles played by intellectual capital in corporate financing decisions. Whereas limiting a firm's debt capacity because of its low liquidation value, intellectual capital enhances a firm's debt capacity through its positive impact on earnings. Our model shows that the former dominates or is dominated by the latter, depending on whether the rate of dissipation of intellectual capital upon default is larger or smaller than a critical level, respectively. Using patent-based and research-and-development-based variables as proxies for intellectual capital, we find robust evidence that the relation between intellectual capital and leverage is positive. Specifically, a one-standard-deviation increase in the level of a firm's intellectual capital is associated with an increase of 6.6% to 21.1% in its market leverage. We further find this positive relation to be stronger for biotechnology firms. © 2011 INFORMS.
Persistent Identifierhttp://hdl.handle.net/10722/144603
ISSN
2015 Impact Factor: 2.741
2015 SCImago Journal Rankings: 4.384
ISI Accession Number ID
Funding AgencyGrant Number
Research Grants Commission of the Hong Kong Special Administrative Region, ChinaHKU7472/06H
HKU727107H
HKU748910H
Funding Information:

An earlier version of this paper circulated under the title "Intellectual Capital and Financing Decisions: Evidence from the U.S. Biotech Firms." The authors are extremely grateful to Simon Gervais (the associate editor) and three anonymous referees for many constructive comments that have greatly improved the paper. The authors thank Hongbin Cai, Bradford Cornell, Michael Darby, Vidhan Goyal, David Hsieh, David K. Levine, Neal Stoughton, Wei Xiong (the department editor), participants at the University of New South Wales, and the 2001 Capital Structure Conference at Rutgers for helpful comments. The authors thank Yong Wei and Jingyi Liu for their excellent research assistance. Financial support from the Research Grants Commission of the Hong Kong Special Administrative Region, China (Projects HKU7472/06H, HKU727107H, and HKU748910H) is gratefully acknowledged. All errors remain the authors' responsibility.

References

 

DC FieldValueLanguage
dc.contributor.authorLiu, Qen_HK
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2012-02-03T06:15:22Z-
dc.date.available2012-02-03T06:15:22Z-
dc.date.issued2011en_HK
dc.identifier.citationManagement Science, 2011, v. 57 n. 10, p. 1861-1878en_HK
dc.identifier.issn0025-1909en_HK
dc.identifier.urihttp://hdl.handle.net/10722/144603-
dc.description.abstractThis paper develops a real options model to understand two distinct roles played by intellectual capital in corporate financing decisions. Whereas limiting a firm's debt capacity because of its low liquidation value, intellectual capital enhances a firm's debt capacity through its positive impact on earnings. Our model shows that the former dominates or is dominated by the latter, depending on whether the rate of dissipation of intellectual capital upon default is larger or smaller than a critical level, respectively. Using patent-based and research-and-development-based variables as proxies for intellectual capital, we find robust evidence that the relation between intellectual capital and leverage is positive. Specifically, a one-standard-deviation increase in the level of a firm's intellectual capital is associated with an increase of 6.6% to 21.1% in its market leverage. We further find this positive relation to be stronger for biotechnology firms. © 2011 INFORMS.en_HK
dc.languageengen_US
dc.publisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.orgen_HK
dc.relation.ispartofManagement Scienceen_HK
dc.subjectCapital structureen_HK
dc.subjectDefaulten_HK
dc.subjectIntellectual capitalen_HK
dc.subjectPatent-based metricsen_HK
dc.subjectR&D-based metricsen_HK
dc.titleIntellectual capital and financing decisions: Evidence from the U.S. patent dataen_HK
dc.typeArticleen_HK
dc.identifier.emailLiu, Q: qliu@hku.hken_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityLiu, Q=rp01078en_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1287/mnsc.1110.1380en_HK
dc.identifier.scopuseid_2-s2.0-80054050134en_HK
dc.identifier.hkuros198178en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-80054050134&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume57en_HK
dc.identifier.issue10en_HK
dc.identifier.spage1861en_HK
dc.identifier.epage1878en_HK
dc.identifier.eissn1526-5501-
dc.identifier.isiWOS:000295926500012-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridLiu, Q=55429572300en_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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