Outside Directors and R&D Investment: An Experience after the Corporate Governance Reform in Korea

39 Pages Posted: 1 Aug 2017

See all articles by Yoo-Chang Shin

Yoo-Chang Shin

Central Connecticut State University

Ji-Hwan Lee

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Date Written: July 31, 2017

Abstract

This paper explores how the structure and composition of the board of directors influence crucial decisions made in the firm, especially in the early years after a massive corporate governance reform towards an Anglo-Saxon system. With a sample of large Korean firms in 2000-2003, this study examines the impact of board independence and demographic diversity on R&D investment. After controlling relevant variables, the ratio of outside directors as well as the diversity in educational and functional backgrounds among outside directors was positively related to R&D intensity. This study also considers the effects of ownership structure to find that board independence was more strongly, positively related to R&D investment when institutional ownership is higher rather than low. Implications and future research direction are discussed.

Keywords: outside directors, R&D decisions, corporate governance reform, Korean firms

Suggested Citation

Shin, Yoo-Chang and Lee, Ji-Hwan, Outside Directors and R&D Investment: An Experience after the Corporate Governance Reform in Korea (July 31, 2017). KAIST College of Business Working Paper Series No. 2017-015, Available at SSRN: https://ssrn.com/abstract=3011714 or http://dx.doi.org/10.2139/ssrn.3011714

Yoo-Chang Shin

Central Connecticut State University ( email )

1615 Stanley St
Maria Sanford Hall - Room 304
New Britain, CT 06053
United States

Ji-Hwan Lee (Contact Author)

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul 02455
Korea, Republic of (South Korea)

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