An information economics perspective on main bank relationships and firm R&D


Höwer, Daniel ; Schmidt, Tobias ; Sofka, Wolfgang


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URL: https://ub-madoc.bib.uni-mannheim.de/29755
Additional URL: http://www.zew.de/de/publikationen/publikation.php...
URN: urn:nbn:de:bsz:180-madoc-297550
Document Type: Working paper
Year of publication: 2011
The title of a journal, publication series: ZEW Discussion Papers
Volume: 11-055
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: 032 , D82 , G30,
Subject headings (SWD): Deutschland , Forschungsfinanzierung , Industrieforschung , Signalling , Bank , Kreditgeschäft , Asymmetrische Information , Theorie , Schätzung
Individual keywords (German): Lieferanten-Kunden-Beziehung
Keywords (English): innovation , banking , information asymmetry
Abstract: Information economics has emerged as the primary theoretical lens for framing financing decisions in firm R&D investment. Successful outcomes of R&D projects are either ex-ante impossible to predict or the information is asymmetrically distributed between inventors and investors. As a result, bank lending for firm R&D has been rare. However, firms can signal the value of their R&D activities and as a result reduce the information deficits that block the availability of external funding. In this study we focus on three types of signals: Firm’s existing patent stock, the presences of a joint venture investor and whether the firm has received a government R&D subsidy. We argue theoretically that all of these signals have the potential to alter the risk assessment of the firm’s main bank. Additionally, we explore heterogeneities in these risk assessments arising from the industry level and the main bank’s portfolio. We test our theoretical predictions for a sample of more than 7,000 firm observations in Germany over a multi-year period. Our theoretical predictions are only supported for firms’ past patent activity while other signals fail to alter the risk assessment of a firm’s main bank. Besides, we confirm that the risk evaluation is not randomly distributed across bank-firm dyads but depends on industry and bank characteristics.

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Höwer, Daniel ; Schmidt, Tobias ; Sofka, Wolfgang (2011) An information economics perspective on main bank relationships and firm R&D. Open Access ZEW Discussion Papers Mannheim 11-055 [Working paper]
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