CEO Equity Incentive And R & D Investment

R&D is basilic to keep a company competitive and efficient.It's necessary for both companys'long-term value building and the economic boom of a country.Based on CEO Equity Incentive Theory,Principal-Agent Theory and Resource-based Theory,by sampling among the listed companies in Shenzhen and Shanghai Securities Exchange as of the end of 2008 date,we use normative analysis and linear regression analysis and make an empirical study on the relationship between CEO equity incentive and R&D investment in the Chinese listed company.After empirical study,we obtain the following conclusions:(1)As proportion of CEO holding the stock increases,enterprise R&D investment intensity can increase at the same time.Equity incentive introduces the value variable into utility function and coordinate the target of company shareholder and operators,make CEO increase R&D investment from long-term interest,encourage operators more attention on the long-term development of the company , and promote enterprise's core competitiveness.Therefore,as the stock of CEO holding increases,R&D investment will increase.(2)High and New Technology Enterprise compared to non High and New Technology Enterprise,the CEO shareholding level influence R&D activities greater.The reason is that high-tech enterprise have great risk and need establish perfect incentive system to combine the interest of managers and the enterprise from a long term.It also shows that,the new technology enterprise of high risk to keep sustainable development,increasing R&D activities by CEO equity incentive is an effective mean.(3)The author also find that,in our small enterprises (SIZE<30 billion yuan),CEO equity incentive and corporate R&D investment are significant positive correlation;but in large enterprises,their correlation is not significant.The reason is that the large enterprises face the little pressure of competition and they are lack of flexibility.They prefer to merger rather than internal technical innovation.(4)CEO equity incentive influences R&D investment significantly in growing quickly enterprises.(5)In the enterprises that the level of debt is lower,CEO equity incentive is significant positive impact to R&D investment.It shows that when the company face greater debt,they tend to reduce spending.Although we abtain some useful conclusions in the paper,but the research also exist some limitations:(1)Because of China's imperfect capital markets and non-mandatory disclosure of R&D investment,resulting in fewer samples,to a certain extent, it weakened the statistical significance of empirical results.(2)Various types of ownership incentive model of enterprises in CEO compensation structure can produce the incentive effect,because of the fewer research samples,but in the paper,CEO equity incentive means CEO holding stock.But There will be some deviation.(3)The empirical part cannot dispel the effect of stock market fluctuation to equity incentive.