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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

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.

Suggested Citation

  • Dong, Jing & Gou, Yan-nan, 2010. "Corporate governance structure, managerial discretion, and the R&D investment in China," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 180-188, April.
  • Handle: RePEc:eee:reveco:v:19:y:2010:i:2:p:180-188
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Huang, Ying Sophie & Wang, Chia-Jane, 2015. "Corporate governance and risk-taking of Chinese firms: The role of board size," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 96-113.
    2. 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.
    3. Maiti, Dibyendu & Mukherjee, Arijit, 2013. "Governance, foreign direct investment and domestic welfare," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 406-415.
    4. 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.
    5. Ghosh, Saibal, 2016. "Banker on board and innovative activity," Journal of Business Research, Elsevier, vol. 69(10), pages 4205-4214.
    6. Lutao Ning & Martha Prevezer & Yuandi Wang, 2014. "Top Management Turnover and Corporate Governance in China: effects on innovation performance," Working Papers 53, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    7. Wang, Yizhong & Wei, Yueling & Song, Frank M., 2017. "Uncertainty and corporate R&D investment: Evidence from Chinese listed firms," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 176-200.
    8. Mohammad-Hossein Setayesh & Gholamreza Rezaei & Mostafa Kazemnezhad, 2016. "Corporate Governance, Investment in Research and Development and Company Performance: A Data Envelopment Analysis Approach Based on Data from a Developing Country," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1114-1122.
    9. Victor LAVRIC, 2014. "ROMANIA’S R&D AND INNOVATION POTENTIAL AT EU LEVEL AND THE MANAGERIAL IMPLICATIONS FOR SMEs," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 8(1), pages 718-726, November.
    10. Wang, Jin-Ying, 2014. "Controlling shareholder entrenchment: Bonuses versus dividends," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 143-158.
    11. 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.
    12. Nawar Hashem & Mehmet Ugur, 2013. "Corporate governance and innovation in US-listed firms: the mediating effects of market concentration," Chapters,in: Governance, Regulation and Innovation, chapter 4, pages 86-121 Edward Elgar Publishing.
    13. 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.
    14. 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.
    15. repec:hur:ijaraf:v:4:y:2014:i:2:p:85-97 is not listed on IDEAS
    16. Fabrizio Rossi & Richard J. Cebula, 2015. "Does the Board of Directors Affect the Extent of Corporate R&D? Evidence from Italian listed companies," Economics Bulletin, AccessEcon, vol. 35(4), pages 2567-2580.
    17. 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.
    18. Chen, Shenglan & Lin, Bingxuan & Lu, Rui & Ma, Hui, 2016. "Pay for accounting performance and R&D investment: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 142-153.
    19. Jiang, Wei & Zeng, Yeqin, 2014. "State ownership, bank loans, and corporate investment," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 92-116.
    20. Lu, Jun & Wang, Wei, 2015. "Board independence and corporate investments," Review of Financial Economics, Elsevier, vol. 24(C), pages 52-64.
    21. 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.
    22. 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.
    23. 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.
    24. 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.
    25. 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.

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