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Law, Stock Markets, and Innovation
Author(s) -
BROWN JAMES R.,
MARTINSSON GUSTAV,
PETERSEN BRUCE C.
Publication year - 2013
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12040
Subject(s) - equity (law) , business , debt , stock market , shareholder , stock (firearms) , monetary economics , investment (military) , finance , capital market , financial market , financial system , economics , corporate governance , mechanical engineering , paleontology , horse , politics , political science , law , biology , engineering
ABSTRACT We study a broad sample of firms across 32 countries and find that strong shareholder protections and better access to stock market financing lead to substantially higher long‐run rates of R&D investment, particularly in small firms, but are unimportant for fixed capital investment. Credit market development has a modest impact on fixed investment but no impact on R&D. These findings connect law and stock markets with innovative activities key to economic growth, and show that legal rules and financial developments affecting the availability of external equity financing are particularly important for risky, intangible investments not easily financed with debt.