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.