Impact Of Equity Incentive On R&D Investment Of Listed Corporations

At knowledge-based economy age,the growth of the national wealth and the improvement of people's lives rely on technology innovation more and more,as the main part of the market economy,listing corporation is the forefront of technology innovation.The process of technological innovation is actually a process of research and development(R&D),which requires a large number of funds and related resources.As the company's decision-making body,management department has the right to decide whether develop the R&D project,so managers play a vital role in the effective investment decision-making.Under the Modern Corporation system,there is a principal-agent problem caused by the separation of the ownership,the inconsistency of the owner' and the manager's utility function will reduce to different utility object.On the issue of R&D investment,the success of R&D project can bring higher profit for the enterprise,which is in line with the owner's interests demands,but the managers take a high risk due to the high-risk,long cycle characteristics of R&D project,the failure of the R&D project will lead to the loss of manager's interest,which is contrary to the manager's object function,then the problem of insufficient R&D investment appears.A better way to solve this problem is to implement equity incentive,to give managers a certain stake,which makes their interest tends to be consistent with the company's interests,prompting them to make more conducive to the company's decision.Discussion of the former scholars about the relationship between equity incentive and corporate R&D investment does not reach the same conclusion,and most of these studies are based on the assumption of "rational economic man".In fact,it is possible to make irrational decisions for the managers will be affected by a variety of factors in the decision-making process,in which,the managers' risk preferences is a factor can not be ignored.Due to the influence of cognitive differences,managers tend to make a unique reflection on the information according to their own preferences,so whether the implementation of equity incentive has led to the increase of R&D investment,what is the role of managers' risk preference in this process,those are the main questions we discussed in this paper.In this paper,we mainly use the literature research method and the empirical analysis method.Combing the relevant literature on equity incentive,risk preference and R&D investment is the first step,and based on the review of principal-agent theory,incentive theory,risk preference theory and technology innovation theory,we put forward the research hypotheses of this paper,then taking the small board and the GEM company data during 2012 to 2014 as the sample,we do the empirical test of the relationship between equity incentives,manager's risk preferences and R&D investment with the methods of comparative analysis and regression analysis.The results show that the influence of equity incentive on the R&D is not immutable,and the relationship between them is an inverted U type,before the turning point,improve the level of equity incentive can promote the R&D investment,and after the turning point,equity incentives to R&D investment will no longer have a positive impact;There is a positive correlation between risk preference and R&D investment,that is,the higher the level of manager's risk appetite,the more inclined to make more R&D investment decisions;After adding the cross-term of equity incentives and risk appetite in the model,the regression results show:managers' risk preference plays a positive moderating role in the influence of equity incentives on R&D investment,that is to say,the higher the level of manager's risk appetite of the listing corporation,the greater the impact of equity incentives on R&D investment;Industry factors and the nature of controlling shareholder also have a significant impact on the company's R&D investment in the empirical model,which means the impact of equity incentives on R&D investment will be different due to the characteristics of industry and the nature of enterprise.This paper finally puts forward some policy recommendations according to the conclusions of empirical research:At the micro level,the company should design reasonable equity incentive mechanism,perfect the human resource allocation and reasonably construct and optimize the management team structure;At the macro level,regulators should strive to foster the mature and rational capital markets;At the same time,there is need to improve the government's support for enterprise technology innovation,ultimately reaching the goal of increasing the value of the enterprise and enhancing the scientific and technological innovation strength of the whole country.