Corporate governance structure, managerial discretion, and the R&D investment in China

This article studies the influence of corporate governance factors on firm R&D investment in a transitional economy like China. By using the data from the listed companies in China, this article statistically tests the hypotheses on the relations between corporate R&D intensity and managerial discretion of CEOs, independent outside directors, degree of share concentration, share held by the state, and share held by a manager. According to the results, the managerial discretion of CEOs has a significant and negative correlation with the firm R&D investment. The number of the independent outside directors in the board has a positive influence on the R&D investment. And as the shares held by a manager increase, the firm R&D intensity will decrease at first, and then increase along an inverted parabolic curve. All these findings show that the improvement of corporate governance and stock incentive plan, and the cultivation of active and long-term stock investors, may finally lead to the upgrade of corporate innovation capabilities.