The Effects of R&D Expenditures on Bondholders in Listed Firms

Research and development (R&D) investment is a kind of strategic behavior filled with high uncertainty and risk. Currently domestic relevant research on the R&D input value mostly emphasizes the enterprise R&D investment impact on shareholder wealth, and less about the trade-off between R&D investment impact on bondholders and shareholders. The present study uses revealed 42 listed Companies' R&D spending in 2007-2011 as the sample to examine the impact on firms stock value and debt value from the perspective of protecting the interests of bondholders. The results show that: For firms with high default risk, R&D increases have a positive impact on bond risk premium. Further, there is a wealth transfer from bondholders to stockholders. Neither of these results is found for firms with low default risk.