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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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    Cited by:

    1. Gregory Jackson, 2016. "Toward a Conceptual Framework for Understanding Institutional Change in Japanese Capitalism: Structural Transformations and Organizational Diversity," Working Papers halshs-01643921, HAL.

    More about this item

    Keywords

    financialization; R&D investment; financial investment; financial crisis;

    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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