The Impact Of R&D On Earning Quality:The Moderating Effect Of Executives'career Expectation

Under the strategy of innovation-driven development,enterprises enhance their innovation ability and market competitiveness through R&D activity.Some enterprises have been reported and punished by the CSRC because of the decline in the earning quality due to the inflated income and assets,The Shenzhen Stock Exchange also evaluates the quality of information disclosure of listed companies.As an important financing platform for SMEs,GEM's earnings quality has been widely concerned by the academic circle,persistence and volatility are two important dimensions for measuring the earning quality.With the increase of enterprise R&D inten sity,high-risk characteristics and accounting treatment of R&D make R&D expenditure have a significant impact on financial reportsn.So will R&D affect the quality of corporate earning?There is little research on this issue at home and abroad.From the perspective of agency theory,executives' characteristics will affect corporate decision-making.and career expectations ultimately affect the quality of earning information through executive decisions.Th is paper takes 2009 to 2016 China's GEM listed company as a sample,and collects R&D expenses and executives'age data from the annual reports disclosed by listed companies,Other financial data comes from CSMAR and Wind databases.By constructing multiple key variables such as R&D in vestment intensity?earning quality?earning persistence and earning volatility,based on the theoretical analysis?this paper empirically studies the influence of R&D on earning quality(including earning persistence and volatility)and the moderating effect of career expectation.The result shows that:(1)Earnings quality is significantly positively correlated with R&D investment intensity,and career expectation can indeed play a moderating role.The tax incentive of R&D investm ent strengthens the supervision of tax revenue and audit,thus improving earning quality.Young executives'career expectation is strong and have weaker motivations for earning management,which is conducive to improving earning quality.The combination of the two positions reduces the agency confl ict between the chairman and CEO and has a positive impact on earning quality;(2)Research and development investment reduces earning persistence and career expectation plays a positive role.The high-risk characteristic of R&D activity reduces the earning persistence.Young executives and the executives with two jobs have strong career expectation,high R&D investment intensity,weak earning smoothing motivation,thereby the earning persistence is poor;(3)R&D investment increases earning volatility,and the positive relationship is stronger in the enterprises whose executives',career expectation is strong.The characteristics of R&D activity such as high risk,high information asymmetry and accounting treatment of R&D expenses,lead to fluctuations in corporate earning.Younger executives have less incentive to smooth profits and corporate profit is more volatile.This paper focuses on the impact of R&D on earning quality under the expectations of senior executives,and provides empirical evidence for the performance evaluation of high-tech companies and the optimization of executive compensation contracts.The contribution of the article is:(1)The existing research suggests that the information asymmetry of R&D will increase the space for enterprises to manage earnings,but this paper believes that the existing research ignores the impact of specific institutional environment.With the tax incentives such as deduction of R&D,R&D investment has become the focus of tax supervision and audit supervision,increasing the opportunity cost of enterprise earning management,and showing that enterprises with more R&D have higher earning quality.The influence of R&D on earning quality is mainly reflected in regulatory effects rather than earning manipulation;(2)It extends earning quality to the two dimensions of sustainability and volatility,and deepens the understanding of the impact of R&D on earning quality.It is generally believed that the stronger the earning persistence,the better the earning quality,but this paper has concluded that weak earning persistence and high earning volatility do not mean poor earning quality.Strong earning persistence and small fluctuation are likely to be the result of smooth profits of enterprises.Therefore,it is necessary to analyze the factors such as investment characteristics,corporate governance and accounting standards;(3)Researches based on the concept of contract think managers with good career prospects will be more aggressively to carry on earning management,however,this paper reveals the other side of the role of career expectation,that is,the executives with good career prospects pay more attention to the pressure brought by supervision and will result in less earnings management due to the consideration of career prospects and the attention to reputation.The impact of R&D on companies has a complex mechanism,which needs to be further explored in the future.