The Effect Of Top Executives' Incentives On R&D Investment:Evidence From Chinese Listed High-tech Companies

R&D investment could make a firm more innovative and more competitive,and of significant importance to the strategy of innovation-driven development.Top executives are ultimately responsible for firm's R&D investment.While there exists conflict of interests between the shareholders and top executives,the R&D investment that top executives select is always lower than the optimal level.That is a kind of moral hazard of hiding information,so in reality,many companies' R&D investment is not enough.High-tech firms are the main body of innovation.This paper begins from the principle-agent relationships between the shareholders and top executives,analyses the effect of top executives' stock incentives on firm's R&D investment,and conclude that the effects are not homogeneous.In the empirical part,using the panel data of Chinese high-tech listed companies from 2013 to 2016,this paper test the endogeneity of top executives' stock incentives and the cross-sectional dependence in R&D activities.Then,we test the influence of the top executives' stock incentive on firm's R&D expenditure,with the newly developed panel quantile regression model with interactive effects,controlling the endogeneity and cross-sectional dependence.Finally,we assess the robustness of our results to(i)alternative R&D expenditure measures,(ii)different estimation methods,and the PSM results confirm our main findings.The results showed that an increase in top executives' stock incentive is positively associated with an increase in R&D spending,and the incentive effects in not homogenous.For the company with high R&D expenditure,the incentive effect is weak;for the company with low R&D expenditure,the incentive effect is influenced by the cost of R&D investment brings to top executives.Further studies show that the incentive effect of top executives' stock incentives on firm's R&D is heterogeneous between state-owned enterprises and non-state-owned enterprises,firms in competitive industries and firms in non-competitive industries,firms with high price informativeness and firms with low stock price informativeness.With these findings,this paper could help different types of companies make efficient top executives' incentive plans.