Author(s): Md. Ibrahim Molla, Md. Kayes Bin Rahaman
Although there has been a lot of research exploring the R&D and firm performance nexus in the last two decades, there is a dearth of studies that can illustrate the threshold influence of R&D on bank performance. This study examines the threshold effect of R&D expenditures on bank performance using panel data of listed banks in Bangladesh spanning from 2011 to 2019. The dynamic panel threshold model has been adopted in this study to assess whether the performance of banks is subject to threshold effects of R&D expenditures. The findings of this paper demonstrate that the relationship between R&D and bank performance is non-linear and a threshold level exists in the relationship between R&D outlays and bank performance. Managers can identify the optimal R&D expenditures based on their respective threshold value to improve banks’ performance and avoid overinvestment on it. To the best of our knowledge, this is the first empirical research that uses bank data to evaluate the threshold effect of R&D spending on bank performance using the dynamic panel threshold model.