Chairman’s Send-down Experiernce,Educational Experience And Firm’s R&D Intensity

With the development of behavioral finance theory,the academic research on the factors of corporate financial behavior has gradually shifted from the fixed effects of industry and company to the fixed effect of corporate managers.Studies have found that measurable managerial characteristics,such as age,gender,education,overconfidence and early experience,have significant explanatory powers for corporate financing decisions.In this paper,We exploit the "Up to the Mountains and Down to the Countryside Movement "during China’s Cultural Revolution,in which millions of urban educated youths were forced to work and live in rural areas.Based on the theory of high-level echelon and psychology,we investigates whether and how chairmans1 send-down experience effect firm’s R&D spending.Specifically,we try to answer the following questions:First,whether and how chairmans’send-down experience effect the corporate R&D spending?Second,in the consideration of the"Educated Youth" generation,whether they received college education after they returned to the city largely determines their life chances,which would certainly effect their risk attitude.Therefore,whether education level of chairman influence the relationship between the send-down experience and corporate R&D spending?Third,due to the constraints on external contractors and supervisory forces are significant differences between state-owned firms and non-state-owned firms,we want to find out whether the influence of the chairmans’ send-down experience on corporate R&D spending is different among this two type enterprises.Fourth,According to the behavioral consistency theory,chairmans’ send-down experience may effect other corporate decision,we try to verify it.Finally,we examine that what economic consequences is for the influence of the chairmans’ send-down experience on corporate R&D spending.As the "Up to the Mountains and Down to the Countryside Movement" was a unique social phenomenon in China,the influence of chairman’s send-down experience on innovation behavior of the company is a unique phenomenon and problem for us.Therefore,the research on the above questions would help to refine and excavate the unique elements of Chinese corporate financial behavior,and provide new explanations for the behavioral bias of Chinese listed companies.At the same time,it also can provides new references and ideas for corporate governance practice in China.Aiming at the above questions,we use the documentary research and logic deduction to develop a framework for studying the effect of chairmans’ send-down experience on corporate R&D spending:chairmans’ send-down experience—risk preference—corporate R&D spending,and propose the main hypotheses of this paper chairmans’send-down experience is negatively associated with the corporate R&D spending.Next,we use the experimental methodology to validate our hypotheses Specifically,Based on a sample of Chinese non-financial listed companies from 2009 to 2015,we investigate whether chairmans’send-down experience is associated with corporate R&D spending.Our results show that the companies whose chairmans had send-down experience spending less on R&D.This result indicates that chairmans’send-down experience increased their sensitivity to risk due to the complex and uncertain macro environment during the send-down period.Since the risk factor is the primary consideration of chairman when making innovative decisions,chairmans’send-down experience is negatively associated with the corporate R&D spending This conclusions is still robust after the dynamic comparison of chairman s change propensity score matching,different definition of variables,and robustness testing for different regression modelsFurther studies show that the risk conservatism of the chairman who had undergone send-down movement is not only reflected in the innovation activities,but also reflected in other corporate decision-making.For example,companies whose chairmans had send-down experience are less diversified,fewer divisions and have a lower investment levels,indicating that they are more inclined to stable management strategy.Secondly,the effect of chairmans’send-down experience on corporate R&D spending has no significant differences between state-owned firms and non-state-owned firms,which indicate that the difference in supervision and incentives of chairman between this two type companies do not constrain the influence of chairmans’send-down experience.Thirdly,education will increase chairmans’awareness of risk.That is,the effect of chairmans’send-down experience on corporate R&D spending is more pronounced when "Educated Youth" chairman had received college education after they returned to the city.Finally,we find that chairmans’ send-down experience increases their sensitivity to risk,which has enabled the chairman to increase the demand for the return rate of innovative projects when making innovative decisions.Resulting in reducing the valueless innovation activities and increasing corporate valueThis paper consists of six parts,and the major contents of each part are outlined as followThe first part is introduction,which briefly introduces research background of our paper,clarify the theoretical and practical significance of our study,and illustrates the general framework and methods of our study.The second part is literature review,our study is relevant to three strands of literature:the influence of managers’ early experience on corporate behavior,the factors affecting corporate innovation activities as well as the impact of send-down experience on individual characteristicsThe third part is theoretical foundation.This part consist of the background of send-down movement,the concept of corporate R&D spending,and theoretical foundation of our study.The fourth part is theoretical analysis and research hypothesis.Based on literature review and theoretical foundation,we use documentary research and logic deduction to develop a framework for studying the effect of chairmans’send-down experience on corporate R&D spending:chairmans’send-down experience—risk preference—corporate R&D spending,and propose the main hypotheses of this paper chairmans’ send-down experience is negatively associated with the corporate R&D spendingThe fifth part is empirical test.Firstly,we construct empirical models with the references of the existing researchs,then we comprehensively use empirical research methods,including descriptive statistical analysis,univariate test,multiple regression analysis and propensity score matching,to verify the relationship between the chairmans’send-down experience and corporate R&D spendingThe sixth part is conclusions and policy recommendations of our study,and points out the direction of further research.