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Managerial innovation incentives, management buyouts, and shareholders' intolerance of failure

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  • Kamoto, Shinsuke
Abstract
This study demonstrates that, apart from managerial agency problem, shareholders' intolerance of failure also deteriorates managerial innovation incentives in public firms. Furthermore, management buyouts improve the innovation intensity, even if managers gain no excess value from the buyouts in collaboration with private equity firms. The study provides insights into the interrelation between firms' innovation, corporate governance, and dividend policy. It presents a rationale behind empirical evidence of a positive relationship between management buyouts and innovation intensity. It provides empirical implications on firms' characteristics that facilitate management buyouts and the return and risk structure of private equity firms.

Suggested Citation

  • Kamoto, Shinsuke, 2017. "Managerial innovation incentives, management buyouts, and shareholders' intolerance of failure," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 55-74.
    • Handle: RePEc:eee:corfin:v:42:y:2017:i:c:p:55-74
    DOI: 10.1016/j.jcorpfin.2016.11.002
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    References listed on IDEAS

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    Cited by:

    1. Rhaiem, Khalil & Halilem, Norrin, 2023. "The worst is not to fail, but to fail to learn from failure: A multi-method empirical validation of learning from innovation failure," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    2. Freisinger, Elena & McCarthy, Ian P., 2024. "What fails and when? A process view of innovation failure," Technovation, Elsevier, vol. 133(C).
    3. Ziyang Li & Qianwei Ying & Wu Yan & Chenjun Fan, 2022. "Does just‐in‐time adoption have an impact on corporate innovation: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1599-1635, April.
    4. Vittori, Davide & Natalicchio, Angelo & Panniello, Umberto & Messeni Petruzzelli, Antonio & Albino, Vito & Cupertino, Francesco, 2024. "Failure is an option: How failure can lead to disruptive innovations," Technovation, Elsevier, vol. 129(C).
    5. Jiangjing Que & Xueyong Zhang, 2020. "The role of foreign and domestic venture capital in innovation: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1077-1110, April.
    6. Tong Li & Nengsheng Luo, 2024. "Dividend Payments and Persistence of Firms’ Green Innovation: Evidence from China," Sustainability, MDPI, vol. 16(18), pages 1-29, September.
    7. Li, Xiuqing & Xiao, Liming, 2024. "The impact of urban green business environment on FDI quality and its driving mechanism: Evidence from China," World Development, Elsevier, vol. 175(C).
    8. Khalil Rhaiem & Nabil Amara, 2021. "Learning from innovation failures: a systematic review of the literature and research agenda," Review of Managerial Science, Springer, vol. 15(2), pages 189-234, February.

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    More about this item

    Keywords

    Management buyouts; Innovation; Corporate governance; Managerial opportunism; Investors' sophistication;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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