Financialization and the Slowdown in Korean Firms' R&D Investment

Hwan Joo Seo (), Han Sung Kim () and Yoo Chan Kim ()
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Hwan Joo Seo: Division of Business Administration, Hanyang University
Han Sung Kim: Ajou University, College of Social Science
Yoo Chan Kim: Division of Business Administration, Hanyang University

Asian Economic Papers, 2012, vol. 11, issue 3, 35-49

Abstract: This study investigates the effects of financialization on research and development (R&D) investment by nonfinancial corporations (NFCs) in Korea from 1994 to 2009. The results indicate that increased dividend payments and stock buybacks impeded R&D investment by reducing internal funds and planning horizons. In addition, increased financial investment and profit opportunities crowded out R&D investment by influencing managers' incentives. Further, estimation results obtained by dividing the sample period into before and after the 1997–98 Asian financial crisis (AFC) indicate that the progress of financialization had a negative effect on R&D investment only after the AFC. © 2012 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Keywords: financialization; R&D investment; financial investment; financial crisis (search for similar items in EconPapers)
JEL-codes: D2 E2 G2 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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