Are institutional investors myopic? A time-series study of four technology-driven industries

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Abstract

This paper examines the popular myth that managers in high-technology industries are altering their critical R&D investments in response to the short-term profit pressures of large institutional stockholders. The study entails an empirical examination of the relationship between R&D spending and institutional ownership over a 10-year period for 129 firms based in four research-intensive industries. Contrary to the view that institutional investors are having a damaging affect on R&D spending, after controlling for intervening effects the results suggest that higher levels of institutional ownership may be associated with greater R&D expenditures. A number of possible explanations for this finding are developed.

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