THE EFFECT OF CORPORATE GOVERNANCE MECHANISMS ON RESEARCH & DEVELOPMENT INVESTMENT IN PAKISTAN

Abstract

The study investigates the effect of corporate governance mechanisms (CGMs) on research and development (R&D) investment in a sample of Pakistani stock exchange listed non-financial firms through panel data regression analysis. Unbalanced panel-data for the period of twelve years from 2011-2022 is analyzed. The findings from fixed effect regression reveal that board size, independent directors, board gender diversity, director’s ownership, independent audit committee and audit quality have a significant effect on R&D investment. Whereas, a significant inverse effect of ownership concentration on R&D spending is documented. However, CEO duality, institutional ownership, and size of audit committee do not have any significant association with R&D spending in the sample firms. These results are valuable for investors and others seeking CGMs that effectively drive R&D investment. The study provides policy maker’s with valuable insights to design corporate governance frameworks that promote R&D spending.