"Multiple Voting Rights System to Increase R&D Investment in Venture Companies"

Junggi Research Institute Announces Analysis Results on the Impact of Introducing Multiple Voting Rights System for Venture Companies

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[Asia Economy Reporter Kim Cheol-hyun] An analysis has revealed that the introduction of a multiple voting rights system can increase research and development (R&D) investment activities in venture companies. On the 24th, the Small and Medium Business Institute announced this through a report titled "Analysis of the Impact of Introducing a Multiple Voting Rights System on Venture Companies' R&D Investment."

Based on an analysis of 14,179 venture companies from Korea Enterprise Data (KED) using the 'generalized propensity score matching' method, it was found that in the range where the major shareholder's equity ratio is between 30% and 50%, an additional 1 percentage point increase in equity ratio can increase the venture company's R&D investment by up to 5.4 million KRW (when changing from 39% to 40%).

The Small and Medium Business Institute explained that assuming the expansion of R&D investment promotes corporate growth, maintaining and strengthening the major shareholder's stable equity ratio in sensitive equity ratio ranges where decision-making authority changes can promote the company's R&D activities, thereby increasing the growth potential of venture companies.

Research Fellow Kim Sang-shin stated, "The introduction of the multiple voting rights system by the Ministry of SMEs and Startups, targeting unlisted venture companies that meet the equity ratio requirements, is expected to achieve not only the legislative purpose of activating large-scale investment attraction without concerns of management dilution but also to some extent the goal of revitalizing R&D investment through stabilizing management rights of venture companies."

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