Do firms use credit lines to support investment opportunities? Evidence from success in R&D

Jiyoon Lee

Research output: Contribution to journalArticlepeer-review


I provide empirical evidence that firms use credit lines to support investment opportunities that are available in good times, consistent with Lins et al., 2010’s survey findings. Employing patent grants as a proxy for R&D success, I find that innovative firms draw down credit lines to finance R&D success-driven capital expenditures. Credit-line drawdowns following R&D success are more pronounced in firms that depend heavily on external financing and incur large capital expenditures after R&D success. The results cannot be explained by credit-supply effects or time-varying state-level omitted variables. Overall, the results suggest that credit lines help firms take advantage of investment opportunities that are gained by R&D success.

Original languageEnglish
Pages (from-to)1-14
Number of pages14
JournalJournal of Empirical Finance
Publication statusPublished - 2022 Dec

Bibliographical note

Funding Information:
I thank Heitor Almeida, Meghana Ayyagari, Christa Bouwman, Murillo Campello, Anjan Thakor and seminar participants at the 2018 Financial Management Association (FMA) conference for valuable comments and suggestions. I also benefited from the excellent research assistance of Boxian Wang. All errors are my own. Part of this work was conducted at the George Washington University.

Publisher Copyright:
© 2022 Elsevier B.V.

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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