Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-15T07:10:31.015Z Has data issue: false hasContentIssue false
  • English
  • Français

Corporate Governance and Innovation

Published online by Cambridge University Press:  17 January 2012

Matthew O’Connor  and
Matthew Rafferty
Matthew O’Connor
Affiliation:
School of Business, Quinnipiac University, 275 Mount Carmel Ave., Hamden, CT 06518. matthew.oconnor@quinnipiac.edu, matthew.rafferty@quinnipiac.edu
Matthew Rafferty
Affiliation:
School of Business, Quinnipiac University, 275 Mount Carmel Ave., Hamden, CT 06518. matthew.oconnor@quinnipiac.edu, matthew.rafferty@quinnipiac.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

We use Tobin’s q models of investments to estimate the relationship between corporate governance and the level of innovative activity. Simple ordinary least squares (OLS) models suggest that poor governance reduces innovative activity. However, OLS results are sensitive to controlling for serial correlation, unobserved effects, or using instrumental variables to control simultaneity. Controlling for these effects substantially reduces or eliminates the relationship between governance and innovative activity.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 47 , Issue 2 , April 2012 , pp. 397 - 413
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Arellano, M., and Bond, S.. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.” Review of Economic Studies, 58 (1991), 277–297.CrossRefGoogle Scholar
Arellano, M., and Bover, O.. “Another Look at the Instrumental Variable Estimation of Error-Components Models.” Journal of Econometrics, 68 (1995), 29–51.CrossRefGoogle Scholar
Bebchuk, L.; Cohen, A.; and Ferrell, A.. “What Matters in Corporate Governance? ” Review of Financial Studies, 22 (2009), 783–827.CrossRefGoogle Scholar
Blundell, R., and Bond, S.. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models.” Journal of Econometrics, 87 (1998), 115–143.CrossRefGoogle Scholar
Blundell, R.; Bond, S.; Devereux, M.; and Schiantarelli, F.. “Investment and Tobin’s Q: Evidence from Company Panel Data.” Journal of Econometrics, 51 (1992), 233–257.CrossRefGoogle Scholar
Blundell, R.; Griffith, R.; and Van Reenen, J.. “Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms.” Review of Economic Studies, 66 (1999), 529–554.CrossRefGoogle Scholar
Coles, J. L.; Daniel, N. D.; and Naveen, L.. “Managerial Incentives and Risk-Taking.” Journal of Financial Economics, 79 (2006), 431–468.CrossRefGoogle Scholar
Fazzari, S.; Hubbard, R. G.; and Petersen, B.. “Financing Constraints and Corporate Investment.” Brookings Paper on Economic Activity, 1 (1988), 141–195.CrossRefGoogle Scholar
Gompers, P.; Ishii, J.; and Metrick, A.. “Corporate Governance and Equity Prices.” Quarterly Journal of Economics, 118 (2003), 107–155.CrossRefGoogle Scholar
Hansen, L. P. “Large Sample Properties of Generalized Method of Moments Estimators.” Econometrica, 50 (1982), 1029–1054.CrossRefGoogle Scholar
Hayashi, F. “Tobin’s Marginal q and Average q: A Neoclassical Interpretation.” Econometrica, 50 (1982), 213–224.CrossRefGoogle Scholar
Hayashi, F. “Corporate Finance Side of the Q Theory of Investment.” Journal of Public Economics, 27 (1985), 261–280.CrossRefGoogle Scholar
Holtz-Eakin, D.; Newey, W.; and Rosen, H. S.. “Estimating Vector Autoregressions with Panel Data.” Econometrica, 56 (1988), 1371–1395.CrossRefGoogle Scholar
Jensen, M. C., and Meckling, W. H.. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics, 3 (1976), 305–360.CrossRefGoogle Scholar
Kaplan, S. N., and Zingales, L.. “Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints? ” Quarterly Journal of Economics, 1 (1997), 169–215.CrossRefGoogle Scholar
Lehn, K.; Patro, S.; and Zhao, M.. “Governance Indexes and Valuation: Which Causes Which? ” Journal of Corporate Finance, 13 (2007), 907–928.CrossRefGoogle Scholar
Mahoney, J. M.; Sundaramurthy, C.; and Mahoney, J. T.. “The Effects of Corporate Antitakeover Provisions on Long-Term Investment: Empirical Evidence.” Managerial and Decision Economics, 18 (1997), 349–365.3.0.CO;2-P>CrossRefGoogle Scholar
Meulbroek, L. K.; Mitchell, M. L.; Mulherin, J. H.; Netter, J. M.; and Poulsen, A. B.. “Shark Repellents and Managerial Myopia: An Empirical Test.” Journal of Political Economy, 98 (1990), 1108–1117.CrossRefGoogle Scholar
Nickell, S. “Biases in Dynamic Models with Fixed Effects.” Econometrica, 49 (1981), 1417–1426.CrossRefGoogle Scholar
Petersen, M. A. “Estimating Standard Errors in Finance Data Sets: Comparing Approaches.” Review of Financial Studies, 22 (2009), 435–480.CrossRefGoogle Scholar
Stein, J. C. “Takeover Threats and Managerial Myopia.” Journal of Political Economy, 96 (1988), 61–80.CrossRefGoogle Scholar
Stein, J. C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics, 104 (1989), 655–669.CrossRefGoogle Scholar
Summers, L. H. “Taxation and Corporate Investment: A q Theory Approach.” Brookings Papers on Economic Activity, 1 (1981), 67–140.CrossRefGoogle Scholar
Thompson, S. B. “Simple Formulas for Standard Errors That Cluster by Both Firm and Time.” Journal of Financial Economics, 99 (2010), 1–10.CrossRefGoogle Scholar