Abstract

http://ssrn.com/abstract=2210609
 
 

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Corporate Governance and Innovation: Theory and Evidence


Haresh Sapra


University of Chicago - Booth School of Business

Ajay Subramanian


Georgia State University

Krishnamurthy Subramanian


Indian School of Business (ISB), Hyderabad

February 1, 2013

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

Abstract:     
We develop a theory to show how external and internal corporate governance mechanisms affect innovation. We show that there is a U-shaped relation between innovation and external takeover pressure, which arises from the interaction between expected takeover premia and private benefits of control. We show strong empirical support for the predicted relation using ex ante and ex post innovation measures. We exploit the variation in takeover pressure created by the passage of anti-takeover laws across different states. Innovation is fostered either by an unhindered market for corporate control, or by anti-takeover laws that are severe enough to effectively deter takeovers.

Number of Pages in PDF File: 80

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Date posted: February 3, 2013 ; Last revised: May 8, 2013

Suggested Citation

Sapra, Haresh and Subramanian, Ajay and Subramanian, Krishnamurthy, Corporate Governance and Innovation: Theory and Evidence (February 1, 2013). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2210609

Contact Information

Haresh Sapra
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Ajay Subramanian (Contact Author)
Georgia State University ( email )
Department of Risk Management and Insurance
P.O. Box 4050
Atlanta, GA 30303
United States
404-413-7483 (Phone)
Krishnamurthy Subramanian
Indian School of Business (ISB), Hyderabad ( email )
Hyderabad, Gachibowli 500 019
India

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