The Effect of Ownership Concentration on R&D Decisions in Korean Firms

Abstract

The current study examines the effect of ownership concentration

on R&D investment by investigating a large panel data set of Korean

listed firms. Theoretically, concentrated ownership structure can be

an alternative to mitigate the agency problem caused by the separation

of ownership and control in a dispersed ownership structure.

However, whether ownership concentration positively affects firm

R&D decisions is not obvious due to the contrasting effects of large

shareholders: risk averseness and long-term orientation. The present

study uses several econometric techniques, fixed effects FGLS regression,

dynamic GMM regression, and subsample regressions, and shows

that the positive effect of ownership concentration on R&D is confirmed

in Korea. A non-linear relation between ownership concentration

and investment is not significant, and neither are the effects of

foreign investors and institutional investors. The results of the subsample

regressions indicate that the positive effect of ownership concentration

is significant in small firms, R&D intensive firms, and

non-chaebol firms.