Executive Compensation Structure, Economic Cycle, and R&D Investment

Xuelian Zuo (), Shiwen Luo () and David Yoon Kin Tong ()
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Xuelian Zuo: Zhejiang Yuexiu University
Shiwen Luo: Zhejiang Financial College
David Yoon Kin Tong: International University of Malaya-Wales

Journal of the Knowledge Economy, 2025, vol. 16, issue 2, No 89, 8394-8419

Abstract: Abstract The purposes of the paper are as follows: First, explore the impact of executive compensation structure on enterprise research and development (R&D) investment. Second, examining the impact of economic cycle on R&D investment and its effect on the relationship between executive compensation structure and R&D investment in China. Empirical verification is carried out utilizing multiple regression analysis and based on the panel data collected from A-share listed companies in China from 2007 to 2014. The study delivers findings as follows: The higher the proportion of equity return in total executive compensation, the more executives are motivated to consider the enterprise’s long-term value and thus are motivated to increase enterprise R&D investment. Such a relationship is more significantly observed in state-owned enterprises. R&D investment is countercyclical, and the economic cycle weakens the incentive effect of the executive compensation structure on enterprise R&D investment. This study provides a reference to guide China’s listed companies in preparing executive compensation contracts and improving the corporate governance system and a reference to guide the government in supporting R&D investment projects under the current circumstances.

Keywords: Compensation structure; Economic cycle; R&D investment (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02189-0

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