Home Original page

The Impact of R&D Intensity and Financial Slack on Company Performance: An Analysis of Companies with the Highest R&D Expenditure in Türkiye

Author

Listed:

  • Cansu Çilingir Kara

Abstract

Financial slack refers to the existence of excess resources, such as unused borrowing capacity, liquid assets, and equity, that companies hold to respond to unexpected opportunities and use during times of crisis. This study conducts an exploratory analysis of the comparative effects of financial slack and the intensity of research and development activities on the profitability of companies operating in Turkey. As stated in Turkish Time (2023), this study uses panel data obtained from 26 companies with the highest research and development expenditures between 2004 and 2023. Panel FGLS analysis shows that the effect of R&D intensity on profitability remains significantly negative. This result can be explained by the long-term focus on returns and the high costs involved. Conversely, financial slack positively affects the company's profitability, and financial slack is seen to mean the slack and capacity to respond to unexpected market demands. However, the additional Panel FGLS analysis, a non-linear inverse U-shaped relationship was found between financial slack and market value (P/B ratio). While these resources increase market value up to an optimal threshold, when accumulated excessively, they can signal inefficiency in resource allocation and negatively impact firm value. Therefore, the strategic management of financial slack is of critical importance.

Suggested Citation

Download full text from publisher

References listed on IDEAS

  1. Ming-Liang Yeh & Hsiao-Ping Chu & Peter Sher & Yi-Chia Chiu, 2010. "R&D intensity, firm performance and the identification of the threshold: fresh evidence from the panel threshold regression model," Applied Economics, Taylor & Francis Journals, vol. 42(3), pages 389-401.
  2. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.

Full references (including those not matched with items on IDEAS)

Most related items

These are the items that most often cite the same works as this one and are cited by the same works as this one.

  1. Hoskins, Jake D. & Carson, Stephen J., 2022. "Industry conditions, market share, and the firm’s ability to derive business-line profitability from diverse technological portfolios," Journal of Business Research, Elsevier, vol. 149(C), pages 178-192.
  2. Averi Chakrabarti & Karen A Grépin & Stéphane Helleringer, 2019. "The impact of supplementary immunization activities on routine vaccination coverage: An instrumental variable analysis in five low-income countries," PLOS ONE, Public Library of Science, vol. 14(2), pages 1-11, February.
  3. Yashar Tarverdi & Anu Rammohan, 2017. "On the role of governance and health aid on child mortality: a cross-country analysis," Applied Economics, Taylor & Francis Journals, vol. 49(9), pages 845-859, February.
  4. Germán Bet & Cecilia Peluffo, 2023. "Democracy, commodity price booms, and infant mortality," Empirical Economics, Springer, vol. 64(1), pages 153-193, January.
  5. Na Li & Richard J. Vyn & Ken McEwan, 2016. "To Invest or Sell? The Impacts of Ontario’s Greenbelt on Farm Exit and Investment Decisions," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(3), pages 389-412.
  6. Ichev, Riste & Valentinčič, Aljoša, 2025. "The effect of impact investing on performance of private firms," Research in International Business and Finance, Elsevier, vol. 73(PA).
  7. Huh, Yesol & Kim, You Suk, 2023. "Cheapest-to-deliver pricing, optimal MBS securitization, and welfare implications," Journal of Financial Economics, Elsevier, vol. 150(1), pages 68-93.
  8. Peter John Robinson & W. J. Wouter Botzen, 2022. "Setting descriptive norm nudges to promote demand for insurance against increasing climate change risk," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(1), pages 27-49, January.
  9. Gozgor, Giray & Li, Jing & Saleem, Irfan & Shinwari, Riazullah, 2025. "The impact of women's political empowerment on renewable energy demand: Evidence from OECD countries," Energy Economics, Elsevier, vol. 141(C).
  10. Ji Yan & Sally Brocksen, 2013. "Adolescent risk perception, substance use, and educational attainment," Journal of Risk Research, Taylor & Francis Journals, vol. 16(8), pages 1037-1055, September.
  11. Sènakpon Fidèle A. Dedehouanou & Luca Tiberti & Hilaire G. Houeninvo & Djohodo Inès Monwanou, 2019. "Working while studying: Employment premium or penalty for youth in Benin?," Working Papers PMMA 2019-03, PEP-PMMA.
  12. Mengyuan Zhou, 2022. "Does the Source of Inheritance Matter in Bequest Attitudes? Evidence from Japan," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 867-887, December.
  13. Sandra Müllbacher & Wolfgang Nagl, 2017. "Labour supply in Austria: an assessment of recent developments and the effects of a tax reform," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(3), pages 465-486, August.
  14. Vuong, Nguyen & Chen, Xuan, "undated". "The Economic Returns to Communist Party Membership: Evidence from the Vietnamese Labor Market," 2018 Annual Meeting, August 5-7, Washington, D.C. 274121, Agricultural and Applied Economics Association.
  15. Campbell, Randall C. & Nagel, Gregory L., 2016. "Private information and limitations of Heckman's estimator in banking and corporate finance research," Journal of Empirical Finance, Elsevier, vol. 37(C), pages 186-195.
  16. Christopher Dick-Sagoe & Ernest Ngeh Tingum & Peter Asare-Nuamah & Denis N. Yuni & Nicholas Baidoo, 2025. "Central transfers and incentives to collect local revenue among the Central Region of Ghana’s local government officials: analysing the flypaper effect," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-12, December.
  17. Maurice Mutisya & Moses W. Ngware & Caroline W. Kabiru & Ngianga-bakwin Kandala, 2016. "The effect of education on household food security in two informal urban settlements in Kenya: a longitudinal analysis," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 8(4), pages 743-756, August.
  18. Kupfer, David & Avellar, Ana Paula, 2011. "Innovation and cooperation: evidence from the Brazilian innovation survey," Documentos de Proyectos 3900, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  19. Ilona Babenko & Benjamin Bennett & John M Bizjak & Jeffrey L Coles & Jason J Sandvik, 2023. "Clawback Provisions and Firm Risk," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 12(2), pages 191-239.
  20. Heredia Pérez, Jorge A. & Geldes, Cristian & Kunc, Martin H. & Flores, Alejandro, 2019. "New approach to the innovation process in emerging economies: The manufacturing sector case in Chile and Peru," Technovation, Elsevier, vol. 79(C), pages 35-55.

More about this item

Keywords

;

;

;

JEL classification:

  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
  • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
  • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

Statistics

Access and download statistics

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ahs:journl:v:10:y:2026:i:4:p:1366-1381. See general information about how to correct material in RePEc.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ersan Ersoy (email available below). General contact details of provider: https://epfjournal.com/ .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.