Institutional Investors,Executive Compensation Stickiness And Corporate R&D Investment Behavior

"Innovation-driven" is an important national strategy for realizing China's economic transformation and sustainable development.As the main force of "innovation-driven",how to fully stimulate the innovation vitality has become the key to the success of the national strategy of "innovation-driven".In the modern enterprises where the two powers are separated,the executives who are rational economic people shoulder the important mission of corporate strategic decision-making and have a serious risk aversion tendency.Therefore,how to design the executive compensation incentive mechanism has an important impact for corporate R&D investment behavior which has the characteristics of strategic?risky and earning spillovers..According to the optimal contract theory,the effectiveness of corporate executive compensation incentives depends on compensation-performance sensitivity.However,the incentive effect of the incentive mechanism based on the optimal contract theory often performs not good in practice.In view of this,the latest theoretical research on the basis of optimal contract theory puts forward the failure tolerance theory of innovation incentives.On the other hand,in the practice of executive compensation,we find that the executive compensation-performance sensitivity has selective asymmetric characteristics,that is,the so-called stickiness of executive compensation;where the institutional investor has a certain important impact to design executive compensation contract and compensation incentives.Based on the above theoretical and practical background,this paper studies the relationship of executive compensation stickiness and corporate R&D investment behavior,and the influence of institutional investors on the relationship,and tries to answer the following questions:(1)Is the characteristics of executive compensation stickiness with failure tolerance prevalent in Chinese listed companies?(2)Does the executive compensation stickiness affect corporate R&D investment behavior?(3)Does Institutional investors have a regulatory effect between executive compensation stickiness and corporate R&D investment?Based on the theory of principal-agent theory,optimal contract theory and failure-tolerance theory,this paper takes Chinese listed companies as the research object and uses the econometric analysis method to conduct theoretical discussion and empirical analysis,and draws the following conclusions:First,the executive compensation of listed companies in China generally shows the sticky characteristics of "heavy reward and light penalty".Further,enterprises with state-owned property rights,high-tech industries,or low-marketization regions have significantly higher levels with executive compensation stickiness,highlighting the differences in different institutional contexts.Second,executive compensation stickiness is significantly positively related to corporate R&D investment.That is,the greater of the degree which the board of directors has "heavy reward and light penalty",the more favorable to promote R&D investment.Further,enterprises with state-owned property rights,high-tech industries and high-marketization regions have more prominent effects on the R&D investment.Third,institutional investors have significantly strengthened the role of executive compensation stickiness in promoting R&D investment.In the differential test of the heterogeneous institutional investors',the results show that the pressure-resisting institutional investors and the long-term institutional investors significantly enhanced the promotion of executive compensation stickiness on R&D investment;and the pressure-sensitive institutional investors and short-term Institutional investors have not strengthened this promotion,and even weakened this promotion to a certain extent.Fourth,institutional investors,pressure-resisting institutional investors and long-term institutional investors have stronger positive regulating effect between executive compensation stickiness and corporate R&D investment in state-owned enterprises,high-tech enterprises,and high-market-oriented enterprises.The main innovations of this paper are as follows:Firstly,based on the research results of the principal-agent theory,and absorbed failure tolerance theory,this paper constructed the theoretical analysis framework of the relationship between the institutional investors(external governance mechanism),executive compensation stickiness(internal incentive mechanism)and enterprise R&D investment(risk-taking behavior).First,it combines the failure tolerance theory that encourages executives to maximize the interests of shareholders and the executive compensation,to provide a theoretical support for the rationality of executive compensation.Secondly,replacing the optimal contract theory with failure tolerance theory,and replacing the traditional linear executive compensation incentive mechanism with the sticky non-linear executive compensation incentive mechanism,this paper establishes an internal logical relationship and a theoretical basis between executive compensation incentive(internal incentive mechanism)and enterprise R&D investment(risk-taking behavior).Finally,under the framework of the classic principal-agent theory,this paper explores the relationship between executive compensation stickiness and corporate R&D investment,and the governance role of institutional investors played in the relationship.Secondly,it has expanded and deepened the research on the relationship between executive compensation incentives and corporate R&D innovation,enriched the empirical research results in this field.So far,although domestic and foreign scholars have done a lot of research on the relationship between executive compensation incentives and enterprise R&D innovation,almost all related researches are conducted from the perspective of compensation level,compensation form and compensation structure.There are only several literatures research on the relationship between executive compensation stickiness and corporate R&D investment,which need to be further expanded and deepened.On the other hand,although the executive compensation stickiness has been concerned by some scholars in recent years,relevant literatures mainly discuss its existence,influencing factors and existing root problems,and the research conclusions are inconsistent.Based on the latest empirical data,this paper makes a systematic and meticulous empirical test on the existence and difference of executive compensation stickiness,which not only provides the latest empirical evidence for the mainstream view that executive compensation stickiness exists in China,but also deepens the analysis of differences.On the basis of executive compensation stickiness,this paper carries out the overall test and grouping test of the relationship between executive compensation stickiness and corporate R&D investment,and confirms that executive compensation stickiness can significantly promote enterprise R&D investment.Thirdly,it has expanded and deepened the research on the role of institutional investors in corporate governance,enriching the empirical research results in this field.Institutional investors as an important external governance mechanism in the relationship between executive compensation and corporate R&D investment,this paper systematically and deeply examines the role played and its mechanism from the perspective of institutional investors as a whole and heterogeneously institutional investors.According to the empirical tests,this paper not only confirms the positive role and strengthening role of institutional investors on the relationship of executive compensation stickiness and corporate R&D investment,but also finds that this active and strengthening role mainly reflected in pressure-resistant institutional investors and long-term institutional investors,while pressure-sensitive institutional investors and short-term institutional investors have not played an active role and no strengthening effect.