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

Authors : Cansu Çilingir Kara

Pages : 1366-1381

Doi:10.30784/epfad.1666691

View : 203 | Download : 267

Publication Date : 2025-12-31

Article Type : Research Paper

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.
Keywords : Ar-Ge Yatırımları, Finansal Gevşeklik, Ar-Ge Yoğunluğu

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