THE EFFECTS OF OWNER IDENTITY AND FINANCIAL MARKETS ON R&D INVESTMENTS. A STUDY OF WESTERN EUROPEAN FIRMS

In this paper we theoretically develop and empirically test the influence of institutional investors in the national stock markets, the degree of ownership concentration and the identity of large shareholders on firms’ level R&D investments. Our analysis is based on a unique dataset of 886 firms publicly traded in four European countries (France, Germany, Italy, and the UK). Controlling for industry and firm-level effects and potential sample selection bias, our findings show that a higher share of institutional investors in national financial markets is negatively associated with R&D investments of widely-held corporations. Moreover, higher shares held by families are negatively associated to R&D investments. Results are robust to possible sample selection biases due to firms discretional R&D disclosure.