The Influence And Value Effect Of Cash Flexibility On R&D Investment

Research and development is an important part of product innovation and technology innovation.It is,under the knowledge economy,the source of core competitiveness of enterprises and the driving force of continued growth.But the underinvestment in R&D is a universal problem in Chinese enterprises.Under the new normal,facing with the opportunities of Innovation-driven transformation,Chinese enterprises need to improve the level of R&D investment.However,the superposition of systematic risks in macro economy highlights the uncertainty of business environment,causing the liquidity constraints which become the main constraint to its R&D investment.Keeping financial flexibility,enabling enterprises to cope with adverse impact and catch the unexpected opportunity,is the policy choice enterprises employ to face the environmental uncertainty.Whether the financial flexibility,under the new norm,can buffer cash flow volatility caused by the uncertainty and make up the cash gap in order to improve the level of Chinese enterprises' R&D investment and the value effect or not,is a practical and significant issue.However domestic researches on financial flexibility generally regard the investment as a whole,ignoring the heterogeneity of different kinds of investment.And most of the previous pertinent literature of R&D investment analyzed the problem of R&D investment only from the angle of cash holdings or from debt problems,missing the analysis and explanation from the perspective of financial flexibility.This article separates the R&D investment from the total investment.On the basis of characteristics of R&D investment,it studies on the relationship between the cash flexibility and R&D investment and make up for the gap between reality demand and theory research to some extent.This paper,based on reviewing the pertinent literature as well as defining?differentiating and analyzing the concept of cash flexibility,conducts a study on the relationship between the cash flexibility and R&D investment from the angle of cash flexibility's financial flexibility attribute and slack resources attribute respectively.What's more,from the perspective of financing constraints and company governance mechanism,it makes further investigation on the factors influencing the relationship between cash flexibility and the value effect of R&D.The main conclusions are as follows:(1)Based on existing theoretical and empirical research,it defines the concept of cash flexibility.Having analyzed on relevant concepts,it puts forward the cash flexibility's financial flexibility attribute and slack resources attribute.Cash flexibility's financial flexibility attribute emphasizes the function of prevention and seizing opportunities.Cash flexibility embodies a kind of "excess" concept which means it is the reserve outside the normal operation and investment needing.It is consistent with the concept of slack resources in theory of organization.As a kind of slack resources,cash flexibility has a high degree of discretion in configuration and use.So from the perspective of agency theory,it is the sources of resources control possessor use to meet self-profit.From the perspective of organization theory,it is the source of resources enterprises employ to carry out strategic adjustment coping with environmental change.(2)From the perspective of financial flexibility attribute it tests the relationship between the cash flexibility and financing constraints of R&D.firstly,it examines the financing constraints of R&D investment,the results of which show that the financing constraints of R&D investment exist in small businesses?young enterprises and private enterprise.On this basis,it tests the factors which influence the cash flexible level,finding that financing constraints enterprises maintain a higher level of cash flexibility and the greater the internal cash flow fluctuates,the higher the cash flexibility level is.Under the result of the research on R&D financing constraints,,it makes further test on the prevention function of cash flexibility,the results of which show that cash flexibility can cushion the R&D financing constraints obviously.Also based on the result of the research on R&D financing constraints,,it examines cash flexibility's function of seizing opportunities,the results of which show that cash flexibility can promote the level of R&D investment.This function works more obviously in financing constraints enterprises and R&D of high strength enterprises(3)From the perspective of cash flexibility's slack resources attribute,it examines the impact of corporate governance mechanisms on the relationship between the cash flexibility and R&D investment.Agency Theory and Modern stewardship theory have two diametrically opposed views and have different requirements on the institutional arrangements of corporate governance.Through testing the influence of different corporate governance mechanisms on the relationship between the cash flexibility and R&D investment,the paper finds out which theory is more suitable to explain R&D investment issues the current Chinese corporate.The results indicate that some corporate governance mechanisms which can improve the degree of supervision on general managers,suppression of moral hazard and adverse selection has a significant positive effect on the relationship between cash flexibility and R&D investment.But those which are able to provide sufficient authorization for the modern steward,trusted environment and cut down the costs of steward responsibility cannot pass the test.It indicates that the current R&D investment of Chinese enterprises still play a major role in the effect of agency costs.(4)From the angle of financing constrains and from the perspective of corporate governance,this paper make further test on factors which can influent the relationship between cash flexibility and value effect of R&D investment.First,cash flexibility increases the value effect of R&D to a certain extent,which was confirmed by the relevant test results.The results of influences financing constrains have on the relationship between cash flexibility and value effect of R&D suggest that the cash flexibility of financial constraints enterprises can promote the value effect of R&D to a greater extent.Under the result of test on the impact of corporate governance mechanisms on the relationship between the cash flexibility and R&D investment,it tests the influence of corporate governance mechanisms on the relationship between the cash flexibility and R&D investment.The results show that the cash flexibility of the companies with the separation of chairman of directors and general manager and of the companies with the dispersion of ownership has a relatively stable promotion on the value effect of R&D,but the impact of the companies with the modest board size on the value effect of R&D is unstable.