A Research On The Influence Of Corporate Governance On R&D Expenditure

Technological innovation is the fundamental driving force of economic growth. But in China, enterprises'being lack of the competence of tech-innovation is determined by the severe shortage of their R&D expenditure, and ultimately leads their low competitiveness. Aiming at this situation of China's enterprises, many Chinese scholars have carried out a large number of researches to explore the constraints to the level of Chinese enterprises'R&D expenditure, and also have got a number of research results with the considerable theoretical value and practical significance, which is an important guarantee for this research to be completed. With the development of corporate governance theory and academic research sector's extension and expansion, more and more scholars start to pay attention to the influence of the basic elements of corporate governance on the enterprises'R&D expenditure, which has laid a solid foundation for the furthering of this research.Firstly, this dissertation reviewed the literatures about the research on the influencing effect factors to technological innovation, and then, the relevant research results about the impact of corporate governance on technological innovation or enterprises'R&D expenditure were sorted analyzed and summarized. The results showed that there were a number of factors affecting the enterprises' R&D expenditure, not only including the macro-policy factors and the micro-factors in enterprises level, but also the various dimensions of corporate governance. But due to various subjective and objective factors, as well as research perspectives and limitations of research methods, different scholars got the different conclusions, which led to their being lack of theoretical value, convincing capacity and practical significance. Therefore, based on the understanding and analysis above, this dissertation focused on the influence mechanism of corporate governance on their R&D expenditure, with certain improvement or innovation of research dimensions and variables measurement in order to ensure this research's systematic, comprehensive and scientific.Secondly, based on the analysis of the concept and theories of corporate governance, this dissertation identified the core function of corporate governance, and then summarized the basic characteristics of technological innovation through the analysis of the basic theory of innovation. After above, this dissertation found the main conflicts of interest during the process of decision-making. Corporate governance is an effective mechanism to resolve such conflicts. Through this logic, we constructed the basic theoretical framework of the influence of corporate governance on technological innovation.Thirdly, this dissertation analyzed deeply the influence mechanism of the internal corporate governance structure on enterprises'R&D expenditure and put forward the hypothesis about the relationship between them. The dimensions were the characteristics of the controlling shareholder, equity ownership concentration, institutional investors, board size, board independence, Strategic Planning Commission in board, leadership structure, the size and independence of the board of supervisors, the equity incentive on board of directors, senior managers and the board of supervisors.Fourthly, this dissertation analyzed deeply the influence of the alternative governance mechanism on enterprises'R&D expenditure and put forward the hypothesis about the relationship between them. Seeing from the influence of creditors'governance mechanism on enterprises'R&D expenditure, there is a negative correlation between them because the enterprises do not tend to invest in technological innovation through debt and the creditors are not inclined to invest in technological innovation projects. Seeing from the influence of the manager's market competition on enterprises'R&D expenditure, there is a positive correlation between them because the implicit incentives to enterprise managers will tend to help the enterprises to make long-term decisions, such as technological innovation to maximize the corporate value. Seeing from the influence of the market for corporate control on enterprises'R&D expenditure, there is a negative correlation between them because of the owners'limitation on interests and the managers'short-sighted decision. Seeing from the influence of the product market competition on enterprises' R&D expenditure, there is a negative correlation between them because the enterprises have neither the driving force nor the will of technological innovation and don't have technological innovation capability with the strengthening of product market competition.Fifthly, after the above theoretical analysis and hypothesis, this dissertation carried on the empirical tests using the data of the listed companies in manufacturing sector in Shanghai and Shenzhen. In the empirical study design, this dissertation selected multiple linear regression method to construct the empirical model. R&D intensity was the dependent variable. Independent variables were selected according to the actual needs of the research and following the process of theoretical analysis. The selection of control variables was mainly based on the domestic and foreign scholars'research results. They were firm size, firm performance, industry type, business growth, firm age, the characteristics of TMT, innovative environment, the level of cash holdings.In the empirical tests, this dissertation presented the descriptive statistics of the sample data first, further proving the situation of the serious shortage of the R&D expenditure. The corporate governance variables were consistent seeing from the results of the descriptive statistics, and basically matched the features of corporate governance in China. Then, it analyzed the influence of the basic driving factors on enterprises'R&D expenditure. Among the selected nine control variables (except the year variable), the regression results of firm size, industry type, firm age, innovative environment and the level of cash holdings passed 1% level of significance test, the regression results of firm performance and executives gender passed 5% level of significance test, but regression results of business growth and average age of executives did not pass the significance test. Finally, this dissertation respectively put the corporate governance variables into the empirical model to test their relationship with enterprises'R&D expenditure. The results showed that theoretical analysis and the corresponding hypotheses in this dissertation were partially verified. As for the inconsistent test results, this dissertation gave the reasonable explanation to them.Finally, based on the above theoretical analysis and empirical test results, this dissertation summarized all the conclusions being drawn from the research and briefly described its limitations. Then, it made some policy recommendations to increase R&D intensity of Chinese enterprises from the improvement of corporate governance.