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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Aleksandra Smirnova
Cash Allocation into R&D: the Role of Board Members in US Biotechnology - Pharmaceutical Sector
Strategic Corporate Finance
(Master’s programme)
2018
The aim of the current paper is to identify how specific board characteristics affect the investment of financial slack (cash) resources into research and development initiatives by lowering information asymmetry during the decision-making process. The author raises the question of corporate governance specificity of healthcare sector, as it is different in term of its financial architecture. The study is drawn on a sample of 260 U.S. public healthcare companies for the 2007-2016 period. Taking into account the difference in business models, the sample was divided into two subgroups. The first consists of more mature firms that have their own developed and commercialized products. The second is represented by entities that heavily rely on researching and developing activities, while currently without any actively marketed products. The findings suggest that financial slack positively influences R&D intensity in both sub-samples for companies from the healthcare sector. Moreover, for the first group insiders, better educated and affiliated with top universities directors positively influence the association between cash and R&D activity. While in the second group this association is positively moderated by directors with medical qualification.

Key words: board of directors, R&D intensity, financial slack, healthcare companies.

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