Executive Risk-taking Incentive And Corporate R&D Investment: The Role Of Irrational Factors

Innovation is an important source of the corporates' core competitiveness and national economic growth.How to encourage enterprises to increase R&D investment effectively is of great practical significance.Especially since the outbreak of a trade war between China and the United States,this issue is particularly prominent and urgent.Traditional principal-agent theory believes that equity incentive for manager can reduce agency costs,thereby solving the problem of insufficient motivation for R&D investment of rational managers.However,the results of empirical research often contradict this.Behavioral finance theory believes that neither investor nor manager conforms to the assumption of rational people.The effect of the irrational factors,that is Investor irrationality(mainly investor sentiment)and manager irrationality(mainly manager overconfidence),to the corporate investment cannot be ignored.In short,the existing related research is basically carried out independently along the above two paths of "rationality" and "irrationality".In view of this,this article starts from reality and combines traditional principal-agent theory and behavioral finance theory into the same analysis framework,focusing on studying the mechanism of the relationship between "irrational" factors on executive risk-taking incentive and corporate R&D investment.This paper draws on relevant research from abroad,introduces key factors such as executive risk-taking incentives,investor sentiment,and managerial overconfidence.Using Chinese capital market data to construct corresponding quantitative indicators.Based on the above logic,this paper mainly study three issues:(1)What is the relationship between executive risk-taking incentive and corporate R&D investment;(2)Whether investor sentiment or managerial overconfidence affects the effect of executive risk-taking incentive;(3)Whether investor sentiment affects managerial overconfidence,which in turn affects the effectiveness of executive risk-taking incentive.This paper selects the listed companies that successfully implemented equity incentive in China's Shanghai and Shenzhen stock markets from 2010 to 2017 as research samples,and uses ordinary least squares(OLS),Probit model,Logit model,and moderated mediation model for regression analysis.This paper obtains the following research conclusions:(1)Overall,there is a significant positive relationship between executive risk-taking incentive and corporate R&D investment;(2)Investor sentiment plays a positive role in the relationship between executive risk-taking incentive and corporate R&D investment,that is a positive moderating effect;(3)Managerial overconfidence plays a negative regulating role in the relationship between risktaking incentive and corporate R&D investment;(4)The moderating effect of investor sentiment on the relationship between risk-taking incentive and corporate R&D investment is mediated by managerial overconfidence.Finally,after controlling the endogeneity,replacing the main research variables and testing the subsamples,the research conclusion is robust.