Stability in Institutional Holdings and R&D: The Study of Indian Companies
摘要
R&D intensity has become a strategic decision for companies to sustain competitiveness and achieve long-term growth. And as institutional ownership interests in listed firms are rising, influence of their actions and decisions on investee companies’ R&D has become a major concern. While earlier studies that have explored the R&D—institutional ownership relation have mainly focused on proportional holdings without considering the stability of institutional holdings. This paper investigates the effect of stability in institutional holdings on R&D activities of the investee company. Stability in institutional holdings may influence investors’ actions which in turn affects their innovation governance practices. Employing a data of 2686 firm-years of Indian listed companies from 2013 to 2019, Empirical evidence in general reveal that increases in stability of institutional equity positions leads to increase in firms’ R&D. While the effect of stability in equity holdings of foreign as well as Domestic institutions on R&D is positive, the effect of stability in foreign holdings is more pronounced than domestic holdings. Furthermore, the results show that institutional holdings with longer investment horizons affects the firms’ R&D intensity positively.