HOW DO INSTITUTIONAL OWNERS HANDLE THE MANAGERS' COMPROMISE BETWEEN RESTRUCTURING AND INNOVATION?

Abstract

Present study intends to detect the explicit association between restructuring charges and R&D expenditures, and the specific influence of institutional ownership on this association. This study examines panel data by two-step system GMM. For the period 2000-2023, the data set includes 13,230 firm-year observations of non-utility and non-financial entities. Results show that the restructuring charges have an impeding influence on R&D expenditures. Moreover, institutional ownership reduces the impeding influence. The acquaintance about the influence of restructuring charges on R&D expenditure will guide investors in the identification and selection of investments with good future prospects. Also, the information about the influence of institutional ownership on the link between restructuring charges and R&D expenditures will help investors in judging the effectiveness of institutional investors. Based on this judgment, investors can consider institutional ownership as a component of their investment screening criteria. The link between restructuring charges and R&D expenditures has not gained attention of researchers in the past, which makes current study a valuable contribution to the literature as it examines this unexplored link along with the influence of institutional ownership on this link.