 The effect of institutional blockholders' short-termism on firm innovation: Evidence from the Korean marketSanggyu Kang, Chune Young Chung and Dong-Soon Kim Pacific-Basin Finance Journal, 2019, vol. 57, issue C Abstract: This study examines how the behavior of institutional blockholders affects investment in research and development (R&D) in Korean firms. Contrary to the monitoring view that institutional investors promote firms' R&D, the results of this study indicate that institutional blockholders have a significantly negative influence on R&D investment. More importantly, when we decompose institutional blockholdings according to institutions' national origins and investment horizons, we find that firms with higher foreign short-term blockholdings spend significantly less on R&D than other firms do. These results show that when the local characteristics of the Korean market (i.e., a predominance of owner-manager firms and weak corporate governance) prevail, institutional monitoring is not effective, and, thus, institutional blockholders tend to focus on the short term. Overall, in the Korean market, stronger short-termism hinders institutional monitoring and negatively affects firms' R&D investments. Keywords: Firm innovation; R&D; Institutional blockholding; Corporate governance; Chaebol; Emerging market (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x18306383 DOI: 10.1016/j.pacfin.2019.101188 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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