Corporate governance and R&D investment: the role of debt financing
Corporate governance and financing decisions of Ghanaian listed firms
Hussain Muhammad,
Stefania Migliori and
Sana Mohsni
Industrial and Corporate Change, 2022, vol. 31, issue 3, 628-653
Abstract:
This paper examines the role of debt financing in the relationship between corporate governance and research and development (R&D) investment using a sample of publicly traded U.S. pharmaceutical firms from 2009 to 2018. The results show a positive and significant association between corporate governance mechanisms (such as board size, board independence, board gender diversity, and ownership concentration) and R&D investment and a negative and significant association between debt financing and R&D investment. In addition, we show that debt financing plays a moderating role and a partial mediating role in the relationship between corporate governance mechanisms and R&D investment. Specifically, debt financing attenuates the negative effect of board size on R&D investment and accentuates the positive effect of ownership concentration on R&D investment. Our study helps to shed light on a close and complex relationship existing between the firm’s choices of corporate governance, debt financing, and R&D investments, which the previous literature has so far examined in a partial and fragmented way. To ensure effective R&D investment, firms need to consider the effect of debt financing on corporate governance decisions.
Date: 2022
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