Vertical Interlocks Of Executives,Environmental Uncertainty And Corporate R&D Investment

R&D investment is one of the most important financial decisions of the enterprise.It provides an important guarantee for enterprises to realize technological innovation strategy,master core competitive technology and obtain long-term development.However,although the level of R&D investment in China’s enterprises is on the rise,the overall level is still low.The average water average for each year from 2007 to 2017 did not exceed 5%.This suggests that there may be some hidden factors in corporate governance that have not yet been discovered,which has a significant impact on R&D investment.At present,a large number of scholars have provided extensive evidence for the factors affecting R&D investment from many angles.Some of the literatures have studied the influence of control of large shareholders on R&D investment from the perspective of control rights(Lee,2012);some literatures also combine horizontal concurrent executives with R&D investment to conduct research from the perspective of the network connection relationship(Kim et al,2015).As one of the types of concurrent executives,vertical interlocks of executives have increased the control of large shareholders,and also strengthened the network relationship between enterprises,but few literatures combine vertical interlocks of executives with R&D investment to conduct research,so this paper will expand the research horizon to explore the impact of vertical interlocks of executives on R&D investment.The existing literature indicates that environmental uncertainty is a contingency factor that companies need to consider when making financial decisions(Qi et al,2010).When companies make R&D decisions,the environmental uncertainty becomes higher,and the impact of vertical concurrent executives on R&D investment may become more significant.In order to explore the influence of vertical interlocks of executives on R&D investment,this paper analyzes the principal-agent theory,resource curse theory and resource dependence theory on the basis of literature reading,and selects the A-share listing of Shanghai and Shenzhen in 2007-2017.The company data was used as the initial research sample,and the initial sample data was screened according to certain principles.And the final research sample was obtained.Descriptive analysis,univariate analysis,correlation analysis,multiple regression analysis,and robustness testing were performed on eligible sample data.In order to explore whether vertical interlocks of executives will have different impacts on R&D investment under different levels of environmental uncertainty,this paper also compares and analyzes according to different degrees of environmental uncertainty,and uses multiple regression analysis.In order to further explore whether the impact of vertical interlocks of executives on R&D investment is different in different situations,this paper also compares and analyzes according to the different types of positions,ownership and accounting firms.The results show that: First,vertical interlocks of executives will reduce R&D investment.Compared with enterprises that do not have vertical concurrent executives,the R&D investment level of vertical interlocks of executives has dropped by an average of 1.05%,because vertical interlocks of executives can improve the control of large shareholders and exacerbate the short-selling motives of major shareholders.At the same time,vertical interlocks of executives can also strengthen the network connection relationship between enterprises,making the development of enterprises less restricted by the bottleneck of resources,and weakening the motivation of enterprises to improve production efficiency by innovation.All of this will result in lower R&D investment.Second,the higher the environmental uncertainty becomes,the more significant the vertical role of senior executives in R&D investment becomes.Because environmental uncertainty will increase the degree of information asymmetry and business risk,the higher environmental uncertainty makes the vertical interlocks of executives tend to reduce the R&D investment.Third,compared with the general manager’ vertical concurrent role,the chairman’s vertical concurrent role has a more negative effect on R&D investment.Because the chairman has greater authority and more representative of the interests of shareholders,and has a far-reaching impact on corporate financial decisions.Fourth,compared with state-owned enterprises,the vertical interlocks of executives have a more negative effect on R&D investment in non-state-owned enterprises.Because the second type of agency conflict in non-state-owned enterprises is more serious,the social and government concerns are lower.Fifth,compared with the four audited enterprises,vertical interlocks of executives have a more negative effect on R&D investment in non-four audited enterprises.Because the four majors are less tolerant of related transactions,violations,and other illegal activities,which means the four audited enterprises will be subject to stricter external supervision.The conclusions of this paper indicate that the supervisory department should improve the supervision and disciplinary mechanism for vertical interlocks of executives’ illegal acts;the non-controlling shareholder of the listed company should actively participate in corporate governance,thus creating a check and balance effect on the power of the major shareholder,and realizing the optimal allocation of resources;enterprises should take the initiative to explore the potential key factors affecting R&D investment,take timely response measures,and strengthen the cultivation of innovation capabilities.