Technology and Financial Structure: Are Innovative Firms Different?

We use data on publicly traded U.K. firms to investigate whether financing choices differ with R&D intensity. As well as looking at a balance sheet measure of the/assets ratio, we also consider the probability of raising finance by issuing new equity, the shares of bank debt and secured debt in total debt. We find a nonlinear relationship the debt/assets ratio: firms that report positive but low R&D use more debt finance than that report no R&D, but the use of debt finance falls with R&D intensity among those that report R&D. We find a simpler relationship with the probability of issuing new: Firms that report R&D are more likely to raise funds by issuing shares than firms that no R&D, and this probability increases with R&D intensity. The shares of bank debt secured debt in total debt are both lower for firms that report R&D compared to those that not, and tend to fall as R&D intensity rises. We discuss possible explanations for these.