Abstract
We investigate the impact of corporate governance on physical and R&D investments in a Seemingly Unrelated Regressing (SUR) system. Marginal q's are estimated using firm fundamental information for physical and R&D investments separately. We find that takeover pressure boosts both physical and R&D investments, public pension funds ownership has a U-shaped relation with physical investment, and greater director ownership is associated with lower physical investment and higher R&D investment. As far as investment distortions are concerned, takeover pressure mitigates the free cash flow problem and exacerbates the debt overhang problem, while public pension funds stockholding and director ownership alleviates the debt overhang for physical investment, and R&D investment, respectively.
| Original language | English |
|---|---|
| Pages (from-to) | 294-311 |
| Number of pages | 18 |
| Journal | Corporate Ownership and Control |
| Volume | 11 |
| Issue number | 3 C |
| DOIs | |
| State | Published - Jan 1 2014 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth -
SDG 9 Industry, Innovation, and Infrastructure
Keywords
- Cointrgration
- Economic growth
- Granger causality
- Saudi Arabia
- Stock market development
- Unit root
- VAR model
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