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Corporate Governance and Innovation

Published online by Cambridge University Press:  17 January 2012

Matthew O’Connor  and
Matthew Rafferty
Matthew O’Connor
Affiliation:
School of Business, Quinnipiac University, 275 Mount Carmel Ave., Hamden, CT 06518. matthew.oconnor@quinnipiac.edu, matthew.rafferty@quinnipiac.edu
Matthew Rafferty
Affiliation:
School of Business, Quinnipiac University, 275 Mount Carmel Ave., Hamden, CT 06518. matthew.oconnor@quinnipiac.edu, matthew.rafferty@quinnipiac.edu
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Abstract

We use Tobin’s q models of investments to estimate the relationship between corporate governance and the level of innovative activity. Simple ordinary least squares (OLS) models suggest that poor governance reduces innovative activity. However, OLS results are sensitive to controlling for serial correlation, unobserved effects, or using instrumental variables to control simultaneity. Controlling for these effects substantially reduces or eliminates the relationship between governance and innovative activity.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 47 , Issue 2 , April 2012 , pp. 397 - 413
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2012

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