Abstract
This study seeks to examine the impact of frequency of board meetings on R&D investment strategy in OECD countries. The study uses a panel data of 200 companies from Anglo American and European countries between 2010 and 2014. The ordinary least square regression is used to examine the relationships. Additionally, to alleviate the concern of potential endogeneity, we use fixed effect regression, two-stage least squares using instrumental variables. The results show that there is a negative and significant relationship between frequency of board meetings and R&D investment strategy, with a greater significance among Anglo American countries than among Continental European countries. The rationale for this is that the legal and accounting systems in the Anglo American countries have greater protection through greater emphasis on compliance and disclosure and therefore allowing for less risk-taking. Future research could investigate R&D investment strategy using different arrangement, conducting face-to-face meetings with firm’s directors and shareholders. This study extends, as well as contributes to the extant CG literature by offering new evidence on the effect of frequency of board meetings on R&D investment strategy between two different traditions. The findings will help regulators and policy makers in the OECD countries in evaluating the adequacy of the current CG reforms to prevent management misconduct and scandals.
Highlights
Corporate governance (CG) mechanisms are important, considering that CG is about how companies use their resources to resolve conflicts among their many stakeholders [1]
This paper investigates the relationship between frequency of board meetings and risk-taking that is measured by R&D intensity [49]-[54], as the natural logarithm of the ratio of R&D expenditure to sales (R&D/Sales)
A comparison of the Anglo American countries and the European countries reveals that both sets of countries show a negative relationship between frequency of board meetings and risk-taking, but that this relationship is shown to be much smaller in the Continental European countries than in the Anglo American countries
Summary
Corporate governance (CG) mechanisms are important, considering that CG is about how companies use their resources to resolve conflicts among their many stakeholders [1]. Country characteristics exert a great deal of influence on the CG systems under which companies operate. Countries have unique legal systems, and these systems influence the nature of the corporate rights that companies must recognise in doing business. Other unique factors that play an important role in this study are the particular accounting practices used, the unique characteristics of the country and their cultures. The key conceptual issues used in this paper are intended to show how CG mechanisms are highly determined by the specific countries in which firms operate, and how the specific mechanisms that are found to be useful in the particular countries are based on the legal, accounting and auditing practices as well as on the specific ownership and debt issues that are common in those countries. Culture influences customs, general worldview, attitudes and values, all of which are instrumental in how firms and their managers carry out their business operations [2] [3] [4] [5] [6]
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