Does Science Make a Difference? Investment, Finance and Corporate Governance in German Industries
David Audretsch () and
Jürgen G Weigand
No 2056, CEPR Discussion Papers from C.E.P.R. Discussion Papers
This paper examines the impact of industry knowledge conditions and corporate governance structures on tangible investment and its financing. Based on a large panel data set of German firms we investigate whether liquidity constraints vary systematically across firms engaged in activities reflecting very different knowledge conditions. In particular, we compare the extent of liquidity constraints in science-based firms with non science-based firms. This distinction is important because science-based firms generally fit the characteristics of market failure identified by Kenneth Arrow. Science-based economic activity is subject to high uncertainty, asymmetric knowledge and non-exclusiveness so liquidity constraints might be severe. Surprisingly, science seems to make a difference in that firms in science-based industries are less liquidity constrained than are their non science-based counterparts. In fact, the larger science-based firms do not seem to face liquidity constraints at all. However, governance structures play an important role. After accounting for the mode of corporate governance, we observe that the owner-controlled but not the manager-controlled firms are significantly liquidity constrained.
Keywords: Corporate Governance; Determinants of Investment (search for similar items in EconPapers)
JEL-codes: G3 L2 O31 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at firstname.lastname@example.org
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:2056
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2056
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().