Corporate governance and innovation investment in publicly listed firms: the moderating effect of ownership type and legal jurisdiction

Abstract

PurposeThe paper aims to examine the effect of corporate governance (CG) on innovation investment, with consideration of ownership types and legal jurisdictions.Design/methodology/approachThe authors' empirical analysis is based on a sample of publicly listed family businesses (FBs) from the top-500-list that matched worldwide with non-family counterparts from 2009 to 2018. The study uses a holistic measure of CG to mitigate the conflicting impact of individual CG components found in prior studies. This measure is applied to examine the moderating role of firm ownership type and legal jurisdiction.FindingsThe authors' results demonstrate that CG positively influences innovation investment. This positive relationship is more pronounced in FBs than in non-family businesses (NFBs) and is more prevalent in civil law economies than in common law economies.Originality/valueThe study holistically examines the effect of CG, capturing the combination of all individual governance mechanisms and their influence on innovation investment. The study further shows that comprehensive CG has diverse impacts on innovation investment when considering family control and legal jurisdiction.

The influence of corporate governance on the performance of family-controlled firms: exploring the effects of legal jurisdiction

“…The independent variables are the board independence (Anderson and Reeb, 2004), board gender diversity (Campbell and M ınguez-Vera, 2008), CGI score (Black et al, 2006;Klein et al, 2005;Xu et al, 2021) and family ownership. The board independence is the percentage of independent directors on boards of directors (IBoD) or the percentage of independent supervisors on supervisory boards (SB).…”

“…The CGI provides a total score for the overall quality of CG as measured by a combination of multiple dimensions, alleviating the measurement inaccuracy associated with a single indicator (Larcker et al, 2007;Xu et al, 2021). CGI is obtained from Morningstar, which is the most comprehensive database of CG scores.…”

Corporate governance and its impact on financial performance and innovation in Chinese‐listed firms

“…The development of capital markets affects CG improves microeconomic efficiency, and also has a strong impact on resource allocation. CG impacts the firm's performance and behavior, innovative activity, economic growth, and entrepreneurship (Saidat et al, 2019: Puni & Anlesinya, 2020: Gangi et al, 2021: Xu et al, 2023). Firms may suffer from financial crises when the debt level rises above the ideal level and they do not follow sound CG; without good CG, the nations will definitely suffer greatly.…”