Abstract

We examine the impact of corporate governance on firms’ innovation. We find that the presence of more anti-takeover provisions impedes firms’ innovation efforts, and thereby, is associated with lower levels of innovation. We also find that boards that have a majority of outside directors or female directors are positively and significantly associated with innovation. Our results show that firms with female CEOs or concentrated ownership structures tend to undertake smaller innovative projects and generate fewer patents, which could be the result of risk aversion. Finally, our results also show that the presence of anti-takeover provisions not only decreases innovative activities directly, but also impedes the efficiency of the monitoring by directors and strengthens the degree of risk aversion of blockholders.