Inderscience Publishers

Corporate governance, relational banking and R&D: evidence from Japanese large firms in the 1980s and 1990s

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We investigate the effects of the Japanese corporate governance structure on corporate investments, especially R&D, dividing Japanese high R&D firms into two groups, i.e. young growing firms and old mature firms. The main bank relationship mitigates the asymmetric information problem for young growing firms. R&D expenditure in the 1990s. Portfolio investors strengthen the cash constraints on R&D, while stable shareholders offset the myopic pressure by portfolio investors. We also show some evidence that stable shareholders induced old mature firms to overinvest during the bubble economy period.

Keywords: j-type corporate governance structure, R&, D, asymmetric information, managerial myopia, free cash flow

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