The Effects of Owner Idendity and Financial Markets on R&D Investments: A Study of Western European Firms
42 Pages Posted: 9 May 2005
Date Written: November 2005
In this paper we theoretically analyze and empirically test the influence of stock market investors, the degree of ownership concentration and the identity of large shareholders on firm-level R&D investments. Our analysis is based on a unique dataset of 1,000 firms publicly traded in six European countries (France, Germany, Italy, Norway, Sweden and the UK). Controlling for industry- and firm-level effects, our findings show that a high share of institutional investors within national financial markets is negatively associated with widely held corporations' R&D investments. Moreover, higher shares held by families and financial institutions in a firm's ownership are negatively associated with R&D investments. Results are robust to potential sample selection biases due to firms' discretional R&D disclosure.
Keywords: Corporate Governance, Ownwership Structure, R&D, Innovation, Market Value
JEL Classification: G15, G32, O31, O33
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