Executive Compensation Incentives and Corporate R&D Investments: An Analysis Based on the Moderating Effect of Managerial Power

Lei Wang, Zhiying Liu, Yixian Wang, Wei Ai and Yunbi An

Emerging Markets Finance and Trade, 2023, vol. 59, issue 8, 2664-2693

Abstract: Using data on Chinese A-share listed companies, this paper explores the interactive effects of managerial power and executive compensation incentives on corporate R&D investments. We find that higher executive monetary compensation and perquisite consumption help increase corporate R&D investments, while a large compensation gap within the management team can inhibit corporate R&D investments. We further show that managerial power has different moderating effects on the relation between management incentives and corporate R&D investments. Managerial power weakens the positive effects of explicit and implicit incentives of executives on corporate R&D investments, while it strengthens the negative effect of the compensation gap within the management team on corporate R&D investments.

Date: 2023
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DOI: 10.1080/1540496X.2023.2190841

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