TMT Career Characteristics,Institutional Investors Governance And Corporate R&D Investment

The absorption capacity on technology innovation of domestic enterprises is relatively weak,so the corporate R&D innovation problem has been the hot spot in the theoretical and practical world.The core competitiveness of enterprises is decided by R&D investment,and the innovation investment can promote a company to obtain a sustainable competitive advantage.As the core decision-makers in the company's R&D investment,the top management team(TMT)'s overall stability and mutual cooperation constitute a premise for R&D investment.TMT's characteristics have a direct impact on the decision-making style when faced with R&D activities.The background characteristics of TMT and its tenure factors are the typical characteristics of such influencing factors,which will directly affect the motivations of TMT and determine their willings to support the R&D activities of the enterprises.Institutional investors play an increasingly important role in corporate governance in China.Under the framework of the theory of principal-agent relationship,the risk preference and time sensitivity of institutional investors as shareholders and TMT as internal managers are heterogeneous when faced with R&D decision-making.Compared with institutional investors,the management is subject to more term contracts,will pay more attention to short-term gains,which led to the agency conflict between TMT and institutional shareholders.How to encourage the management effectively,so that in accordance with the interests of institutional shareholders in the same direction R&D investment,deserve further study on this issue.Furthermore,this paper explores the incentive to TMT when institutional investors play a strict supervisory role.If TMT consider the risk expectations of the R&D investment's failure with deterministic tenure and pay as a reference point,they may have more incentives to reduce R&D investment.Thus,discussing on how to effectively encourage TMT to increase R&D investment obtains more theoretical and practical significance.This paper first defines related concepts of this research.Through the review of predecessors' research,this paper points out the limitations of existing researchs.With theoretical analysis,we constructs the theoretical framework of TMT-institutional investors-corporate R&D investment,and puts forward relevant hypothesis.In the positive analysis part,we use descriptive statistics and multiple regression analysis,further discussion on the ownership nature and robustness testing methods,then examine executives career characteristics and institutional investors governance impacts on R&D investments using samples of the non-financial A-stock listed companies.We find that TMT career characteristics have significant positive influence on R&D investments.The longer term TMT engage in and the higher monetary compensation they get,the corporate R&D investments will be larger.However,this incentive effect to increase R&D investments will be weakened in an environment which institutional investors could supervise the TMT effectively.For the risk of future career reputation damage and a dismission resulting from R&D investments failure,TMT tend to avoid risk and have less willings to increase R&D investments.This article highlights the balance of the short and long term incentives.The board and shareholders should encourage the protection on the salary incentive of TMT,and be prudent to penalize executives for the deperformance caused by R&D investments failures,which will dispel TMT's worry and motivate them to increase R&D investments.