Managerial equity incentives and R&D investments in emerging economies: study based on threshold effects

ABSTRACT

Do managerial equity incentives benefit or impede R&D investments? To address this question and the inconsistent empirical findings on the topic, this study investigates the relationship between equity incentives and R&D investments as well as the threshold effects of some contextual factors. Our study evidence a curvilinear inverted U-shaped relationship between equity incentives and R&D investments by using GMM system estimators for a sample of 158 Chinese firms for the 2006–2018 period. Our findings also indicated that the influence of equity incentives on R&D investments is constrained by contextual factors such as financial slack and equity concentration, suggesting that financial slack plays a double threshold effect on the above relationship, while equity concentration performed a significant single threshold effect.

KEYWORDS:

• Equity incentives
• R&D investments
• financial slack
• equity concentration
• threshold effect

JEL CLASSIFICATION:

• C33
• D21
• M52
• O32

Acknowledgements

We thank the editors and anonymous reviewers for their helpful suggestions. This work was supported by the projects of the National Social Science Foundation of China (16AGL007) 2016.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The SinoFin database was published by the SinoFin Financial Information Service Center set up by Peking University. The Center is committed to providing investors and researchers, both at home and abroad, with international data services. The database considers the special situation of China’s securities market and has powerful data extraction software, which can provide relatively detailed R&D investment data for listed companies.

2 The CSMAR database (China Stock Market & Accounting Research Database) is an advanced professional and accurate database for academic research in China. It provides data on more than 500 universities and financial institutions at home and abroad for empirical analyses on China’s securities, economy, and finance (http://www.tarsc.com).

3 This study focuses on the general manager, president, CEO, assistant general manager, vice president, secretary to the board of directors, and other directors as the managerial layer.

Additional information

Funding

This paper was supported by the project of the National Social Science Fundation of China a Study on the characteristics of M&A and industrial optimization under the supply-side structural reform under the supply-side structural reformm. The project number is 16AGL007.

Notes on contributors

Xi Zhao

Xi, Zhao The professor from college management and economics of Tianjin University and the first management accounting consultant of Tianjin. She focused on the research of financial issues in corporate mergers and acquisitions, financial management of the company, enterprise cost control and budget management. Tel.: [phone], E-mail: tjusmile @163.com.

Delin Lin

Delin, Lin The corresponding author. A lector at School of Economics and Management, Yantai University, got a Ph. D at college of management and economics of Tianjin University in 2019, and research on corporate innovation, mergers and acquisition and equity incentives. Tel.:[phone], E-mail:[email protected].