The Determinants of Research and Development Investment in the Pharmaceutical Industry: Focus on Financial Structures

OBJECTIVES: This study analyzes the influence of the financial structure of pharmaceutical companies on R&D investment to create a next-generation profit source or develop relatively cost-effective drugs to maximize enterprise value. METHODS: The period of the empirical analysis is from 2000 to 2012. Financial statements and comments in general and internal transactions were extracted from TS-2000 of the Korea Listed Company Association (KLCA), and data related to stock price is extracted from KISVALUE-Ⅲ of NICE Information Service Co., Ltd. Stata 12.0 was used as the statistical package for panel analysis. RESULTS: The current ratio had a positive influence on R&D investment, the debt ratio had a negative influence on R&D investment, and return on investment and net sales growth rate did not have a significant influence on R&D investment. CONCLUSION: It was found in this study that the higher liquidity ratio, the greater the R&D investment. The stability of pharmaceutical companies has a negative influence on R&D investment. This finding is consistent with the prediction that if a company faces a financial risk, it will be passive in R&D investment due to its financial difficulties.