The Interaction Effects between Corporate Ownership Structure and R&D Expenditures on Profitability
Woojin Jung (Research Professor, Graduate School of Information, Yonsei University)
Jong-Hee Lee (Graduate Student, Graduate School of Information, Yonsei University)
Shin Cho (Professor, Graduate School of Information, Yonsei University)
The previous studies on the determinants of firm performance only focused on the separate effects of ownership structure and R&D expenditures on the profitability. On the contrary, this paper examines the interaction effects between ownership structure and R&D expenditures on the profitability by analyzing the panel data composed of 571 manufacturing firms listed in KSE(Korea Stock Exchange) and KOSDAQ for the period of 2007-2014. The major findings are as follows; (1) For both KSE and KOSDAQ listed firms, the interaction effects between CEO stockholding and R&D intensity on ROE(Return on Equity) turned out to be statistically insignificant. (2) Regarding the interaction effects between the largest shareholder’s portion and R&D intensity, we find the significantly negative relationship in KSE firms, implying that these two variables are ‘substitutes’ in improving ROE. This ‘substitute’ effect seems to be alleviated in KOSDAQ firms mainly because the founders with technology expertise are still in charge of the business. These findings provide several strategic and policy implications for the ownership structure. This study contributes to the existing literature by analyzing for the first time the interaction effects between ownership structure and R&D intensity on ROE.
R&D Expenditures, Corporate Ownership Structure, Agency Costs, Moderating Effects
Innovation studies, Vol.13 No.2, pp.1-33