R&D intensity and financial performance

This study examines impacts of research and development (R&D) expenditure on the financial performance of Japanese manufacturing industries. For the purpose, we apply a discriminant analysis (DA) to group classification between non-default and default firms. The DA estimates a discriminant function using probit and logit models. The financial performance of a firm is evaluated by the estimated discriminant function. The relationship between the financial performance and R&D intensity is investigated using the function, as well. The results identify that R&D expenditure makes a positive impact on the financial performance of Japanese machinery industry, but it yields a negative impact on Japanese electrical equipment industry.