Journal of Financial and Quantitative Analysis, Forthcoming
31 Pages Posted: 6 Mar 2011
Date Written: February 28, 2011
We use Tobin's q models of investments to estimate the relationship between corporate governance and the level of innovative activity. Simple OLS models suggest that poor governance reduces innovative activity. However, OLS results are sensitive to controlling for serial correlation, unobserved effects, or using instrumental variables to control of simultaneity. Controlling for these effects substantially reduces or eliminates the relationship between governance and innovation activity.
Keywords: Corporate Governance, Research and Development
JEL Classification: G34, O32
Suggested Citation: Suggested Citation
Rafferty, Matthew and O'Connor, Matthew L., Corporate Governance and Innovation (February 28, 2011). Journal of Financial and Quantitative Analysis, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1773020