Tangible and intangible investment in corporate finance

Research and development (R&D) investment has increased dramatically in recent decades but not been explored extensively implications for the firms' liquidity management. In this paper, we propose a dynamic model of a financially constrained firm about R&D and physical investment, financing and risk management, and then analyze the market-timing decisions about the corporate liquidation, external equity, credit debt and payout. And the comparative static analysis about R&D is also given. We find that the firm value changes sharply with the obsolescence rate of R&D, the volatility of R&D stocks will decrease the firm value-capital ratio, and R&D investment is more impressionable to financing frictions than physical investment. Our model and analysis provide the new insight into the investment and financing of intangible capital.