Research On The Synergy Effect Between Executive Overconfidence And Compensation Incentive On R&D Investment

As a special investment activity,corporate R&D investment is of great strategic significance.Executives as corporate decision-makers have the absolute right to decide whether to carry out R&D investment.The previous researches on the factors affecting corporate R&D investment are more from the perspective of the characteristics of the enterprise itself or the characteristics of R&D innovation,ignoring the key role of corporate executives in R&D investment decisions.There is no doubt that corporate behavior is the embodiment of executives' will,so those factors that affect executives' R&D decision-making and then affect corporate R&D investment are more convincing.Therefore,from the perspective of corporate executives,based on the Upper Echelons Theory and combined with the Overconfidence Theory and the Principal-agent Theory,this paper deeply discusses the synergy effect between executive overconfidence and compensation incentive on R&D investment,hoping to provide a new perspective for the existing researches and provide empirical support for the development of corporate R&D investment.In this paper,both literature analysis and empirical analysis have been adopted to study the synergy effect between executive overconfidence and compensation incentive on R&D investment.In the aspect of literature analysis,this paper reviews the Enterprise Innovation Theory,the Upper Echelons Theory,the Overconfidence Theory and the Principal-agent Theory,and combs the empirical research literatures about the influence of executive overconfidence and compensation incentive on R & D investment,laying a solid foundation for the subsequent empirical analysis.In the aspect of empirical analysis,firstly,this paper makes analysis on the independent incentive effect of executive overconfidence and compensation incentive on R&D investment,and then analyzes the synergy effect and puts forward two hypotheses.Secondly,it further analyzes the influence of corporate ownership,industry characteristics and financing constraints on the synergy effect and puts forward three hypotheses.Finally,taking2011~2015 China's A-share listed companies as samples,this paper makes empirical tests on above hypotheses by constructing multiple regression models with interaction terms.In addition,in order to ensure the reliability of the research results,the robustness test is carried out by changing the measurement indicator and expanding the time span of the sample companies.Our conclusions are as follows:(1)Executive overconfidence and compensation incentive(monetary compensation incentive and stock ownership incentive)can improve corporate R&D investment and show a significant synergy effect,so that the joint incentive effect of executive overconfidence and compensation incentive is greater than the sum of their independent incentive effects;(2)The synergy effect between executive overconfidence and compensation incentive on corporate R&D investment exists only in non-state-owned enterprises,but there is no synergy effect in state-owned enterprises;(3)The synergy effect between executive overconfidence and compensation incentive on corporate R&D investment exists both in high-tech enterprises and non-high-tech enterprises,but the synergy effect of the former is more obvious;(4)The synergy effect between executive overconfidence and compensation incentive on corporate R&D investment exists both in the enterprises with strong financing constraints and the enterprises with weak financing constraints,but the synergy effect of the former is more obvious.Therefore,the enterprise should give full play to the synergy effect between executive overconfidence and compensation incentive on R&D investment,and consider the impact of corporate ownership,industry characteristics and financing constraints.