Does state ownership affect R&D investments? Evidence from China

Figures & data

Table 1. Variable definition

Variables	Definition
R&D intensity	Research and development expenditures scaled by the total sales for firm i in year t.
State Ownership	Indicator variable equals to one if the company is a state-owned, and zero otherwise.
Firm Age	The natural logarithm of the number of years since the listed of the firm.
Firm Size	The natural logarithm of total assets for firm i in year t.
Leverage	The total debt for firm i in year t scaled by the total equity.
ROE	Net operating income divided by total equity for firm i in time period t.
Risk	Beta coefficient of firm’s stock.
Pay Growth	The average salary growth rate of executive team.
Board Meeting	The annual meeting number of board.
Busy Board	Dummy variable that takes the value of one if at least 50% of the shareholder representatives hold three or more directorships, and zero otherwise.
Busy Chair	Dummy variable that takes a value of one if the chair of the supervisory board holds three or more directorships, and zero otherwise.
Chair Age	Chronological age of Chair.
CEO Age	Chronological age of CEO.
CEO Founder	Dummy variable set to one if the CEO is the founder of the company, and zero otherwise.
Chair Founder	Dummy variable set to one if the chairman is the founder of the company, and zero otherwise.
CEO Tenure	The number of continuous years CEO has been in his/her role for firm i in time period t.
Chair Tenure	The number of continuous years Chair has been in his/her role for firm i in time period t.
CEO Power	The total score of seven variables form principal component analysis. We use comprehensive and more objective measure following Finkelstein (1992) and construct CEO power index based on seven variables, including duality (P1), shareholding (P2), tenure (P3), education (P4), relatives (P5), political relationship (P6), and independence of board (P7). And use the factor analysis method to obtain the comprehensive score as the CEO power. P1 equals one if the CEO is also the chairman, and zero otherwise. P2 equals one if CEO holds shares, and zero otherwise. P3 equals one if CEO’s tenure is higher than the median of the industry, and zero otherwise. P4 equals one if CEO has a master degree or above, and zero otherwise. P5 equals one if CEO has relatives in the board, and zero otherwise. P6 equals one if CEO is working in a relevant government institution, and zero otherwise. The independence of board is measured by the ratio of the number of independent directors to the number of board members. P7 equals one if the ratio of independent directors is less than the median of the industry, and zero otherwise

Table 2. Descriptive statistics

Variables	Mean	SD	Min	Max
Dependent variable
R&D intensity	0.031	0.11	0.00	0.41
Independent variable
State ownership	0.29	0.45	0.00	1.00
Control variables
Firm Age (log)	2.58	0.50	0.00	3.20
Firm Size (log)	22.16	1.44	13.76	28.52
Leverage	0.490	0.21	0.069	1.00
ROE	0.068	0.084	-0.13	0.229
Risk	1.080	0.492	-2.86	14.13
Pay Growth	0.368	1.081	-0.75	6.94
Board Meeting	3.70	0.80	1.00	12
Busy Board	0.153	0.360	0.00	1.00
Busy Chair	0.123	0.328	0.00	1.00
CEO Power	-0.008	0.278	-0.360	0.79
Chair Age	52.7	6.957	26	85
CEO Age	49.0	6.32	24	80
CEO Founder	0.19	0.39	0.00	1.00
Chair Founder	0.53	0.49	0.00	1.00
Chair Tenure	3.82	2.87	0.08	28
CEO Tenure	3.53	3.02	0.078	18

Table 3. Correlation matrix

Variables	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17
1. R&D	1
2. State Ownership	0.023	1
3. Firm Age	-0.084	0.369	1
4. Firm Size	-0.011	0.025	0.210	1
5. Leverage	-0.009	0.257	0.112	0.142	1
6. ROE	-0.002	0.141	0.307	0.218	0.252	1
7. Risk	-0.087	0.176	0.141	0.018	0.166	0.008	1
8. Pay Growth	-0.037	-0.008	-0.129	-0.139	-0.005	-0.172	0.216	1
9. Board Meeting	-0.004	0.097	0.031	0.047	0.011	0.030	0.083	-0.195	1
10. Busy Board	-0.023	0.054	0.014	-0.169	0.077	0.026	0.243	0.258	-0.114	1
11. Busy Chair	0.016	0.039	0.036	0.014	0.026	-0.001	0.059	0.020	-0.163	0.038	1
12. CEO Power	0.009	-0.065	-0.122	-0.126	-0.053	-0.051	-0.030	0.018	0.073	-0.107	-0.102	1
13. Chair Age	-0.004	0.041	0.149	0.065	0.040	0.066	0.112	-0.027	0.100	0.194	0.066	-0.046	1
14. CEO Age	0.008	0.024	0.019	-0.086	0.062	0.013	0.107	0.001	0.129	0.074	-0.025	-0.048	0.099	1
15. CEO Founder	-0.012	-0.098	0.003	0.006	-0.036	-0.0431	0.135	0.163	-0.046	0.174	0.020	-0.029	0.084	0.040	1
16. Chair Founder	-0.029	0.039	0.144	0.126	0.002	0.106	0.046	-0.054	0.030	-0.120	-0.031	0.093	0.142	-0.007	0.052	1
17. CEO Tenure	-0.023	-0.051	0.056	0.104	-0.019	0.027	0.026	0.012	0.019	-0.012	0.051	-0.035	0.294	0.140	0.386	0.19	1

Table 4. State ownership and R&D intensity

Variables	Coef.	t-value
State Ownership	0.0094	1.95**
Firm Age	0.0100	11.62***
Firm Size	-0.0021	-8.57***
Leverage	-0.0014	-0.09
ROE	-0.0034	-1.45
Risk	0.0076	2.48**
Pay Growth	0.0011	7.07***
Board Meeting	0.0013	2.47**
Busy Board	0.012	2.85***
Busy Chair	-0.0014	-0.990
CEO Power	0.0065	0.550
Chair Age	0.0039	0.350
CEO Age	-0.0013	0.490
CEO Founder	0.001	0.680
Chair Founder	.000016	0.360
CEO Tenure	-0.0019	-2.42**
Chair Tenure	-0.0015	-1.69*
Constant	0.0330	6.62***
adj. R^2	0.058
N	18,138

*, **, *** indicate statistical significance at the 0.10, 0.05, and 0.01 levels (two-tailed), respectively

Table 5. State ownership and board meetings

Variables	Coef.	t-value
State Ownership	0.190	1.710*
Firm Age	0.110	12.8***
Firm Size	0.089	20.6***
Leverage	0.051	2.320
ROE	0.157	4.250
Risk	0.001	0.340
Pay Growth	0.0013	0.540
Busy Board	0.002	0.030
Busy Chair	0.098	0.870
CEO Power	0.0280	2.380
Chair Age	-0.005	-0.910
CEO Age	-0.0014	-2.47**
CEO Founder	0.0194	2.03**
Chair Founder	-0.0021	-0.300
CEO Tenure	-0.009	-6.58***
Chair Tenure	-0.006	-4.39***
Constant	-0.160	-1.80*
adj. R^2	0.093
N	18,138

*, **, *** indicate statistical significance at the 0.10, 0.05, and 0.01 levels (two-tailed), respectively

Table 6. State ownership and R&D intensity (measured by RD/TA)

Variables	Coef.	t-value
State Ownership	0.0072	2.08**
Firm Age	0.023	7.12***
Leverage	-0.0010	-0.08
ROE	-0.0051	-1.05
Risk	0.0029	1.70*
Pay Growth	0.0032	3.01***
Board Meeting	0.0025	1.90**
Busy Board	0.019	3.14***
Busy Chair	-0.009	-0.95
CEO Power	0.0011	0.230
Chair Age	0.029	0.480
CEO Age	-0.008	0.190
CEO Founder	0.045	0.620
Chair Founder	0.0005	0.730
CEO Tenure	-0.0074	-2.63**
Chair Tenure	-0.0081	-1.97**
Constant	0.0530	5.69***
adj. R^2	0.091
N	18,138

*, **, *** indicate statistical significance at the 0.10, 0.05, and 0.01 levels (two-tailed), respectively

Finkelstein, S. (1992). Power in top management teams: Dimensions, measurement, and validation. Academy of Management Journal, 35(3), 505–538. doi:10.5465/256485

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