Study On Relationship Of Financing Constraints And Corporate R&D Investment From Agency Conflict Perspective

As international competition intensifies, only a country which has a strong capability ofinnovation can seize the initiative in the fierce international competition. R&D input in ourcountry maintain steady growth in recent years, the intensity of national R&D investmenttakes a leading position in the emerging and developing countries. However, despite theproportion of corporate investment in R&D of the whole society is not low, but the intensityof corporate R&D investment is still insufficient. R&D investment insufficient associatedwith financing constraint, also agency conflicts played an important role in regulating therelations between the two, which includes the agency conflict between shareholders andmanagement, also the agency conflict of controlling shareholder and other shareholders. Thetopic of this paper is the relationship between financing constraints and R&D investmentfrom the perspective of agency conflicts.This paper takes2010-2012Chinese companies listed on GEM as samples, combine themethods of theoretical analysis with empirical analysis to research the relationship betweenfinancing constraints and corporate R&D investment from agency conflict perspective. Thispaper proposes the hypotheses on the basis of literature review and theoretical analysis, testsand verifies the research hypotheses by setting the research model and variables. Theempirical research includes descriptive test, correlation analysis, regression analysis. Theresults were robustness tested, finally this paper gets the conclusions.The results of this paper indicate that:(1) It proves the restricting effects of financingconstraints on R&D investments using sample from GEM’s listed companies.(2) From thepoint view of agency conflict between shareholders and management, management holdingshares in the company or high concentration of the shareholders’ ownership can easefinancing constraints on R&D investment, also the improvement of conflict betweenshareholders and management can help ease the effects that financing constraints have onR&D investment.(3) To see from the agency conflict between controlling shareholders andother shareholders, higher proportion of the controlling shareholder exacerbated theconstraints on R&D investment, power balance with shareholder structure can improve theconstraint relations. This paper argues that, in the case of inadequate investment in research and development, imperfect financial market and the strong financing constraint, resolvingthe financial constraints while improving two types of agency conflicts can ease the effects offinancing constraints on R&D investment. From the government perspective, thegovernment should broaden the channels of R&D financing, build the R&D funding system;from the enterprise perspective, the enterprise should adjust management’s performanceappraisal approach, focus on research and development activities in the performance appraisal.Through the way of managerial ownership, it can regulate agency conflicts betweenshareholders and management, so that the aspirations of both sides converge. Improvingshareholder and board governance reduces the impact of internal control on R&D investment.At the same time introducing equity balances to avoid dominance which leads to reduce R&D investment.