Financial Constraints and R&D Investment: The Moderating Role of CEO Characteristics

Ximing Yin, Ben-lu Hai and Jin Chen
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Ximing Yin: School of Economics and Management, Tsinghua University, Beijing 100084, China
Ben-lu Hai: Business School, Henan Normal University, Henan 453007, China
Jin Chen: School of Economics and Management, Tsinghua University, Beijing 100084, China

Sustainability, 2019, vol. 11, issue 15, 1-18

Abstract: How CEOs with different characteristics act differently on R&D investment under the condition of financial constraints is an important but understudied question towards firms’ sustainable innovation. Employing the dataset from China-Enterprise Survey 2012 of the World Bank, this study tests the impact of financial constraints on firms’ R&D investment and the moderating role of CEO characteristics. Empirical results show that: (1) firm’s financial constraints have a significant restricting effect on their R&D investment; (2) internal financial constraints have no significant restricting effect on R&D investment for firms with female CEOs in comparison with firms with male CEOs, while the external financial constraints have a significant restricting effect on R&D investment for both groups. (3) CEO experience has a non-linear moderating effect on the relationship between financial constraints and a firm’s R&D investment. When the accumulated experience is overloaded, the positive moderating effect of CEO experience begins to decline and even become negative. Robustness tests further confirm these empirical findings. This study directly contributes to the literature of financing innovation and top management team’s impact on firms’ sustainable innovation, and generates insights on firms’ R&D management under the condition of financial constraints.

Keywords: sustainable innovation; financial constraints; R&D investment; moderating effect; CEO characteristics (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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