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Corporate governance structure, managerial discretion, and the R&D investment in China

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  • Dong, Jing
  • Gou, Yan-nan
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    Abstract

    This article studies the influence of corporate governance factors on firm R&D investment in a transitional economy like China. By using the data from the listed companies in China, this article statistically tests the hypotheses on the relations between corporate R&D intensity and managerial discretion of CEOs, independent outside directors, degree of share concentration, share held by the state, and share held by a manager. According to the results, the managerial discretion of CEOs has a significant and negative correlation with the firm R&D investment. The number of the independent outside directors in the board has a positive influence on the R&D investment. And as the shares held by a manager increase, the firm R&D intensity will decrease at first, and then increase along an inverted parabolic curve. All these findings show that the improvement of corporate governance and stock incentive plan, and the cultivation of active and long-term stock investors, may finally lead to the upgrade of corporate innovation capabilities.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Economics & Finance.

    Volume (Year): 19 (2010)
    Issue (Month): 2 (April)
    Pages: 180-188

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    Handle: RePEc:eee:reveco:v:19:y:2010:i:2:p:180-188

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    Web page: http://www.elsevier.com/locate/inca/620165

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    Keywords: R& D investment Managerial discretion Corporate governance China;

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    Cited by:
    1. Doong, Shuh-Chyi & Fung, Hung-Gay & Wu, Jr-Ya, 2011. "Are social, financial, and human capital value enhancing? Evidence from Taiwanese firms," International Review of Economics & Finance, Elsevier, vol. 20(3), pages 395-405, June.
    2. Lai, Jung-Ho & Chen, Li-Yu & Chang, Shao-Chi, 2012. "The board mechanism and entry mode choice," Journal of International Management, Elsevier, vol. 18(4), pages 379-392.
    3. Xu, Pisun (Tracy), 2013. "Managerial incentives and a firm's cash flow sensitivities," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 80-96.
    4. Rihab Guidara & Younes Boujelbene, 2014. "R&D-Based Earnings Management and Accounting Performance Motivation," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 81-93, April.
    5. Dibyendu Maiti & Arijit Mukherjee, . "Governance, Foreign Direct Investment and Domestic Welfare," Discussion Papers 10/27, University of Nottingham, GEP.
    6. Rihab Guidara & Younes Boujelbene, 2014. "R&D-Based Earnings Management and Accounting Performance Motivation," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 85-97, April.
    7. Huang, Hui & Shi, Xiaojun & Zhang, Shunming, 2011. "Counter-cyclical substitution between trade credit and bank credit," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 1859-1878, August.
    8. Charoenwong, Charlie & Ding, David K. & Siraprapasiri, Vasan, 2011. "Adverse selection and corporate governance," International Review of Economics & Finance, Elsevier, vol. 20(3), pages 406-420, June.
    9. POPA Ion & LAVRIC Victor, 2013. "Managerial Methods Stimulating New Ideas Or Creativity In Romania Wihin The European Context," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 65(6), pages 128-138.
    10. Victor Lavric, 2012. "The Dynamics Of R&D Activities In Romania Within The European Context," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 6(1), pages 648-654, November.
    11. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2014. "Controlling shareholder, split-share structure reform and cash dividend payments in China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 339-357.
    12. Popa Ion & Lavric Victor, 2013. "Highly Important Objectives For Innovation In Romania Within The European Context," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1588-1594, July.
    13. Victor LAVRIC, 2013. "The Dynamics Of R&D Human Resources In Romania Within The European Context," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 7(1), pages 259-267, November.

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