The Effects of R&D Investment and Firm Size on Growth Opportunities of Newly Listed Firms: European Evidence

26 Pages Posted: 24 Jan 2007

See all articles by Salim Chahine

Salim Chahine

American University of Beirut - Olayan School of Business

Igor Filatotchev

City University London - Sir John Cass Business School

Jenifer Piesse

University of Stellbosch; King's College London - Department of Management

Date Written: January 2007

Abstract

Using data for 831 IPO firms listed from 1986 to 1998 in the UK, France, Germany and Italy, this paper investigates the inter-relationships between R&D and growth opportunities in different national systems of corporate governance. Results indicate that growth opportunities are positively related to R&D investments, and negatively related to financial leverage and firm size. Growth opportunities are also negatively related to the interaction between financial leverage and R&D investments, particularly countries with weak minority shareholder protection, such as Germany, Italy and France. Further, a positive effect of the interaction between leverage and R&D activities is greater in larger UK firms, but negative in smaller UK firms. The interaction of leverage and R&D has a negative effect on growth in small firms and this is stronger in continental Europe than in the UK.

Keywords: Growth Opportunities, Newly Listed Firms, Leverage, Firm Size, External Corporate Governance mechanisms

JEL Classification: G31, G32, G34

Suggested Citation

Chahine, Salim and Filatotchev, Igor and Piesse, Jenifer, The Effects of R&D Investment and Firm Size on Growth Opportunities of Newly Listed Firms: European Evidence (January 2007). Available at SSRN: https://ssrn.com/abstract=959155 or http://dx.doi.org/10.2139/ssrn.959155

Salim Chahine

American University of Beirut - Olayan School of Business ( email )

Bliss Street
Beirut 1107 2020
Lebanon
961-1-374-374 (Phone)

Igor Filatotchev

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Jenifer Piesse (Contact Author)

University of Stellbosch

Stellenbosch, Western Cape
South Africa

King's College London - Department of Management ( email )

Virginia Woolf Building
22 Kingsway
London, England WC2B 6NR
United Kingdom

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