Replicating the R&D investments and financial structure relationship: evidence from Borsa İstanbul

I revisit the empirical relationship between R&D investments and financial structure by trying to replicate seminal paper of Aghion et al. (J Eur Econ Assoc 2:277–288, 2004). In the widely cited study, Aghion et al. (2004) found evidence of a nonlinear (an inverted U-shape) relationship—firms with positive R&D tend to use more debt than firms with zero R&D, but the use of debt falls with R&D intensity—in a sample of U.K. firms from 1990 to 2002. In order to review their significant findings, I use panel data of 177 Turkish manufacturing firms listed in Borsa İstanbul from 2007 to 2016. Using Aghion et al.’s (2004) model specifications, I found no evidence of an inverted U-shape relationship or of any effect of R&D intensity on the leverage ratio. The study thus suggests that the effect of R&D investments on the financial structure may vary with the different samples of countries and cannot be universally generalized.