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

Listed author(s):
  • Dong, Jing
  • Gou, Yan-nan
Registered author(s):

    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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    File URL: http://www.sciencedirect.com/science/article/pii/S1059-0560(09)00104-X
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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    2. Vincent L. Barker , III & George C. Mueller, 2002. "CEO Characteristics and Firm R&D Spending," Management Science, INFORMS, vol. 48(6), pages 782-801, June.
    3. Dobson, Wendy & Safarian, A.E., 2008. "The transition from imitation to innovation: An enquiry into China's evolving institutions and firm capabilities," Journal of Asian Economics, Elsevier, vol. 19(4), pages 301-311, August.
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    6. Lee, Yung Sheng & Rosenstein, Stuart & Wyatt, Jeffrey G., 1999. "The value of financial outside directors on corporate boards," International Review of Economics & Finance, Elsevier, vol. 8(4), pages 421-431, November.
    7. Zhu, Pingfang & Xu, Weimin & LUNDIN, Nannan, 2006. "The impact of government's fundings and tax incentives on industrial R&D investments--Empirical evidences from industrial sectors in Shanghai," China Economic Review, Elsevier, vol. 17(1), pages 51-69.
    8. Jian Gao & Gary H. Jefferson, 2007. "Science and Technology Take-off in China?: Sources of Rising R&D Intensity," Asia Pacific Business Review, Taylor & Francis Journals, vol. 13(3), pages 357-371, July.
    9. Delcoure, Natalya, 2007. "The determinants of capital structure in transitional economies," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 400-415.
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    11. Wendy Dobson & A.E. Safarian, 2008. "Making the Transition from Imitation to Innovation: An Enquiry into China’s Evolving Institutions and Firm Capabilities," Working Papers Series 11, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Mar 2008.
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