Research and development, cash flow, agency and governance: UK large companies

Abstract

This paper investigates the determinants of R&D expenditure using a sample of UK listed companies with the highest spend from 2000 to 2005. We investigate the effect of corporate governance and ownership on R&D, using panel data. The results provide some evidence that more governance tends to depress R&D activity, a finding that is robust to whether a composite or disaggregated index of governance is used. One innovation of the paper is that we treat agency and finance effects interactively. The ownership stake of the CEO appears to be supportive for R&D.