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Financialization and the Slowdown in Korean Firms' R&D Investment

Author

Listed:
  • Hwan Joo Seo

    (Division of Business Administration, Hanyang University)

  • Han Sung Kim

    (Ajou University, College of Social Science)

  • Yoo Chan Kim

    (Division of Business Administration, Hanyang University)

Abstract

This study investigates the effects of financialization on research and development (R&D) investment by nonfinancial corporations (NFCs) in Korea from 1994 to 2009. The results indicate that increased dividend payments and stock buybacks impeded R&D investment by reducing internal funds and planning horizons. In addition, increased financial investment and profit opportunities crowded out R&D investment by influencing managers' incentives. Further, estimation results obtained by dividing the sample period into before and after the 1997–98 Asian financial crisis (AFC) indicate that the progress of financialization had a negative effect on R&D investment only after the AFC. © 2012 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Hwan Joo Seo & Han Sung Kim & Yoo Chan Kim, 2012. "Financialization and the Slowdown in Korean Firms' R&D Investment," Asian Economic Papers, MIT Press, vol. 11(3), pages 35-49, Fall.
    • Handle: RePEc:tpr:asiaec:v:11:y:2012:i:3:p:35-49
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    Citations

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    Cited by:

    1. Zhao Chen & Sang-Ho Lee & Wei Xu, 2017. "R&D Performance in High-Tech Firms in China," Asian Economic Papers, MIT Press, vol. 16(3), pages 193-208, Fall.
    2. Bonizzi, Bruno & Kaltenbrunner, Annina & Powell, Jeffrey, 2019. "Subordinate financialization in emerging capitalist economies," Greenwich Papers in Political Economy 23044, University of Greenwich, Greenwich Political Economy Research Centre.
    3. Diogo Correia & Ricardo Barradas, 2021. "Financialisation and the slowdown of labour productivity in Portugal: A Post-Keynesian approach," PSL Quarterly Review, Economia civile, vol. 74(299), pages 325-346.
    4. Halima Jibril & Annina Kaltenbrunner & Effi Kesidou, 2018. "Financialisation and innovation in emerging economics," FMM Working Paper 27-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    5. Xu, Xiaodong & Mu, Yayu & Wang, Juan, 2023. "Corporate risk and financial asset holdings," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).
    6. Zhang, Qiuyue & Que, Jiangjing & Qin, Xiuting, 2023. "Regional financial technology and shadow banking activities of non-financial firms: Evidence from China," Journal of Asian Economics, Elsevier, vol. 86(C).
    7. Chong Li & Qiuge Yao & Jing Wu & Daoyuan Wang, 2019. "Financialization and Risk Taking of Non-Financial Corporations Empirical Evidence from Chinese Listed Companies," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(3), pages 1-5.
    8. Lee, Sang-Ho & Chen, Zhao & Xu, Wei, 2017. "R&D Efficiency in High-Tech Firms in China," MPRA Paper 80734, University Library of Munich, Germany.
    9. Gregory Jackson, 2016. "Toward a Conceptual Framework for Understanding Institutional Change in Japanese Capitalism: Structural Transformations and Organizational Diversity," Working Papers halshs-01643921, HAL.
    10. Yang, Jinghao & Chen, Siyu, 2023. "Corporate financialization, digitalization and green innovation: A panel investigation on Chinese listed firms," Innovation and Green Development, Elsevier, vol. 2(3).

    More about this item

    Keywords

    financialization; R&D investment; financial investment; financial crisis;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • D2 - Microeconomics - - Production and Organizations
    • G2 - Financial Economics - - Financial Institutions and Services

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