Nature of Controlling Stake, Manager Shareholding, and R&D Investment


This paper makes an empirical analysis on influence relation of manager equity compensation on R&D investment under different nature of controlling stake by applying multivariate regression analysis and ordinary least square and taking China listed companies from 2007-2012 as samples. The study finds that in state controlled enterprises, management shareholding ratio has positive influence relation on R&D investment intensity; in non-state-controlled enterprises, management shareholding ratio has “range effect” influence relation on R&D investment intensity. The research of this paper can further expand existing relevant theory of corporate governance and R&D investment, and provide theoretical support and decision reference for enterprises to optimize compensation contract and correct R&D underinvestment.

Share and Cite:

Liu, Z. and Liu, B. (2015) Nature of Controlling Stake, Manager Shareholding, and R&D Investment. American Journal of Industrial and Business Management, 5, 324-333. doi: 10.4236/ajibm.2015.55033.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] Dosi, G. (1988) Source, Procedures and Microeconomic Effects of Innovation. Journal of Economic Literature, 26, 1120-1171.
[2] Ettlie, J.E. (1998) R&D and Global Manufacturing Performance. Management Science, 44, 1-11.
[3] Hamel, G. and Prahalad, C.K. (1994) Competing for the Future. Harvard Business Review, 72, 122-128.
[4] Jense, M.C. and Meckling, W.H. (1976) Theory of Firm: Managerial Behavior, Agency Costs and Capital Structure. Journal of Financial Economics, 3, 305-360.
[5] Fama, E.F. (1980) Agency Problems and the Theory of the Firm. Journa1 of Political Economy, 88, 288-307.
[6] Dechow, P. and Sloan, R. (1991) Executive Incentives and Horizon Problem: An Empirical Investigation. Journal of Accounting and Economics, 14, 51-89.
[7] Cheng, S.J. (2004) R&D Expenditures and CEO Compensation. The Accounting Review, 79, 305-328.
[8] Li, C.T. and Song, M. (2010) Innovation Activities in Chinese Manufacturing Firms: The Roles of Firm Ownership and CEO Incentives. Economic Research Journal, 5,55-66
[9] Wu, J.F. and Tu, R.T. (2007) CEO Stock Option Pay and R&D Spending: A Behavioral Agency Explanation. Journal of Business Research, 60, 482-492.
[10] Liu, W. and Liu, X. (2007) The Effects of Management Ownership on Firms’ R&D Expenditures: Evidences from A-Share Firms in China from 2002 to 2004. Science of Science and Management of S. & T., 10,172-175.
[11] Liu, Y.G. and Liu, W. (2007) Top Executive Tenure and R&D Expenditure in Chinese Listed Companies. Management World, 1, 128-136.
[12] Su, W.B., Xu, D.H. and Liang, Y.D. (2011) Managerial Discretion and Political Cost on R&D Expenditure. Finance and Trade Research, 3, 136-146.
[13] Wang, Y.N. (2011) The Influence of Top Management Incentives on R&D Investment—Evidence from Listed Manufacturing Companies in China. Studies in Science of Science, 7, 1071-1078.
[14] Zhang, Z.Y. and Zhang, M. (2007) Empirical Research on the Relationship between Corporate Governance and R&D Investment in the High-Tech Enterprises. Science of Science and Management of S. & T., 5, 23-26.
[15] Liu, Z. and Song, X.Z. (2010) CEO Motivation and Investment Preference Analysis-Based on Data of China Listed High-tech Companies. Science & Technology Progress and Policy, 1, 88-91.
[16] Tang, Q.Q. and Yi, C. (2010) Risk Preference of Executive Shareholders and R&D Investment Motivation. Contemporary Economic Management, 2, 20-25.
[17] Du, C. and Lin, T.T. (2011) CEO Turnover, Equity-Based Compensation and Firm’s Investment Decisions. Journal of Business and Economics Research, 9, 19-40.
[18] Martin, R., Casson, P.D. and Nisar, T.M. (2007) Investor Engagement: Investors and Management Practice under Shareholder Value. Oxford University Press, Oxford.
[19] Tsai, K.H. (2004) The Impact of Technological Capability on Firm Performance in Taiwan’s Electronics Industry. Journal of High Technology Management Research, 15, 183-195.
[20] Srivastava, D.K., Shervani, T.A. and Fahey, L. (1998) Market-Based Assets and Shareholder Value: A Framework for Analysis. Journal of Marketing, 62, 2-18.
[21] Calantone, R.J., Cavusgil, S.T. and Zhao, Y. (2002) Learning Orientation, Firm Innovation Capability, and Firm Performance. Industrial Marketing Management, 31, 515-524.
[22] Liu, Z. (2014) The Relationship of Contract Design of CEO’s Compensation, R&D Investment and Corporation Value Creation. Forum on Science and Technology in China, 5, 143-148, 154.
[23] Mehran, H. (1992) Executive Incentive Plans, Corporate Control, and Capital Structure. The Journal of Financial and Quantitative Analysis, 27, 539-560.
[24] Liu, W.N. and Wen, H.L. (2013) Effects of Executive Compensation Incentive on R&D Investments a Behavioral Study of Corporate Governance Based on Taiwanese Firms. International Journal of Corporate Governance, 4, 260-276.
[25] Martin, G.P., Gomez-Mejia, L.R. and Wiseman, R.M. (2013) Executive Stock Options as Mixed Gambles: Revising the Behavioural Agency Model. Academy of Management Journal, 56, 451-472.
[26] Fama, E. and Jensen, M. (1983) Separation of Ownership and Control. Journal of Law and Economics, 26, 301-325.

Copyright © 2023 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.