Outside Directors and R&D Investment: An Experience after the Corporate Governance Reform in Korea
39 Pages Posted: 1 Aug 2017
Date Written: July 31, 2017
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
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