The influence of financial markets and corporate governance on R&D policy of Dutch companies

The Dutch capital market is peculiar, at least because of the three following reasons. Only a relatively small number of Dutch companies is listed at the Amsterdam Stock Exchange, because most Dutch companies raise funds from retained earnings, bank- credits and long term borrowing. Furthermore, the relatively small group of listed companies is heavily dominated by a small number of large companies. Finally, the liquidity of the stock market is relatively low and concentrated in the thirty largest funds. Not only the structure and functioning of the stock market influences the relationship between shareholders and company management, but also the corporate governance structure of companies. Dutch corporate governance can be characterized as a system aiming at balancing the interests of shareholders, management and workers. One of the side effects of Dutch legislation at this point is that it provides Dutch companies also a large number of measures to prevent hostile take-overs. In this chapter, the most important information about the Dutch capital market will be provided, as well as the most relevant legislation on corporate governance in The Netherlands. This information provides the background for our analysis of the perception by Dutch corporate financial managers of the short term pressures their shareholders place upon them. We will also try to evaluate what the effects of short term pressures are on Research and Development (R&D) policy and R&D management in Dutch companies. A final paragraph gives a brief summary of the most important findings and discusses the most relevant findings of our study.