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Law, Stock Markets, and Innovation

James Brown (), Gustav Martinsson and Bruce Petersen

No 393, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: We study a broad sample of firms across 32 countries and find that strong shareholder protections and better access to stock market financing lead to substantially higher long-run rates of R&D investment, particularly in small firms, but are unimportant for fixed capital investment. Credit market development has a modest impact on fixed investment but no impact on R&D. These findings connect law and stock markets with innovative activities key to economic growth, and show that legal rules and financial developments affecting the availability of external equity financing are particularly important for risky, intangible investments not easily financed with debt.

Keywords: Financial development; Investor protection; Stock markets; R&D; Innovation; Economic growth (search for similar items in EconPapers)
JEL-codes: G32 K20 O16 O30 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2015-01-21
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-ino, nep-law, nep-sbm and nep-tid
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Journal Article: Law, Stock Markets, and Innovation (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0393

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