The determinants of financing sources for research and development investment in Malaysian listed companies / Elka Vionnalissa Francis

This study aims to investigate the relationship between different financing sources and the research and development investment of companies that are listed under ACE Market of Bursa Malaysia. The investigation is carried out based on panel data for a sample of 26 Malaysian listed companies under ACE Market. The period of study is taken for eight years starting from 2011 to 2018, which is after the global financial crisis that was believed to give negative impact for company to finance their research and development activities. This study chose research and development intensity (R&D over sales) as a proxy for research and development (R&D) investment. Financing decision is one of the important areas in financial management in order to increase shareholders’ wealth. Firms can use either debt or equity capital to finance their assets. Therefore, this study analyse three types of financing sources which include internal financing ratio, debt ratio and equity financing ratio as the independent variables. This study also includes a set of control variables that commonly employed in the empirical literature as determinants of research and development investments which are the size, tangibility and return on assets. The results indicate that internal financing ratio, debt ratio, and equity financing ratio have a positive and significant relationship with research and development intensity. Size and tangibility are negatively correlated with research and development intensity but the relationship is insignificant. Return on assets has a positive relationship with the research and development intensity but the relationship is not significant as well.