Abstract
The aim of this study is to investigate how moral hazard is related to R&D and technological innovation activities of Turkish firms through their corporate governance attributes and firms specific characteristics. Therefore we study 103 firms that received a specially designed loan by a Turkish government body to be invested only in R&D and technological innovations. We find that as the size of the loan increases firms are less prone to moral hazard. For family firms our results support agency theory. For large shareholders, initially our results are aligned with agency theory but after controlling for the loan size our results hold for stewardship theory. Finally we find that as amount of the loan increases relative to size of a firm, the efficiency of a project financed by these loans plummets. And the efficiency varies across different industries.
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