The Separate and Joint Effects of the Market for Corporate Control and Board Effectiveness on R&D Valuation

Posted: 28 Apr 2018

See all articles by Shimin Chen

Shimin Chen

China Europe International Business School (CEIBS)

Bin Srinidhi

University of Texas at Arlington - Department of Accounting; City University of Hong Kong (CityUHK) - Department of Accountancy

Lixin (Nancy) Su

Department of Accountancy, Lingnan University

Jamie Yixing Tong

University of Western Australia

Date Written: August 17, 2017

Abstract

This study finds that stronger market control (measured as fewer anti-takeover provisions) and more effective boards (measured as boards that are more independent and for which independent directors have more outside directorships) are both associated with higher R&D valuation. Furthermore, stronger market control (more effective board governance) is associated with higher R&D valuation only in the presence of weaker board governance (market control). Taken together, the results are consistent with the interpretation that both the market for corporate control and effective boards mitigate agency conflicts arising from R&D investments and improve the market valuation of R&D. Furthermore, the two mechanisms act as substitutes in doing so.

Keywords: Board, market for corporate control, R&D valuation

Suggested Citation

Chen, Shimin and Srinidhi, Bin and Su, Lixin (Nancy) and Tong, Jamie Yixing, The Separate and Joint Effects of the Market for Corporate Control and Board Effectiveness on R&D Valuation (August 17, 2017). Australian Journal of Management, Vol. 43, No. 2, 2018. Available at SSRN: https://ssrn.com/abstract=3159899

Shimin Chen (Contact Author)

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Bin Srinidhi

University of Texas at Arlington - Department of Accounting ( email )

Arlington, TX 76013
United States

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Lixin (Nancy) Su

Department of Accountancy, Lingnan University ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

Jamie Yixing Tong

University of Western Australia ( email )

Perth, Perth 6009
Australia

Register to save articles to
your library

Register

Paper statistics

Abstract Views
265
PlumX Metrics