Institutional Investors,R&D Expenditures And Its Capitalization

R&D activities related to the long-term strategic and future competitive advantage for the enterprises.It costs huge money,and whether these expenditures turn into results is usually unknown.Among the factors that affect the level of R&D expenditure,equity characteristics are important ones.With the rapid development of the capital market in China,the institutional investors have gradually grown and developed,holding more and more shares and the market value.As a result,institutional investors as a special and professional investment groups appear in the corporate governance structure,becoming a special role in the Chinese listed firms.This paper using Chinese A-share listed companies with R&D and innovation activities from 2011 to 2015 as sample,explore whether the R&D expenditure intensity of these listed companies will be affected by the institutional investors' shareholdings.It is found that the proportion of total institutional investors' shareholdings is negatively correlated with the R&D expenditure intensity of these listed companies.After distinguished the heterogeneity of institutional investors,we found that institutional investors with pressure-resistance can promote the intensity of R&D expenditure of listed companies,while pressure-sensitive institutional investors are the opposite.And the difference between them is whether there is a potential business relationship with the investment target,which determines the independence of their corporate governance.With further examination,we found that as increasing the proportion of institutional investors' shareholdings in these A-share listed companies,the share ratio of pressure-sensitive institutional investors tends to exceed the pressure-resistance institutional investors,which results in the whole institutional investors showing a negative impact on the R&D expenditure intensity.This paper also examines how listed companies with R&D activities will influence the pressure-sensitive institutional investors' investment decisions.It is found that the R&D expenditure will reduce the willingness of pressure-sensitive institutional investors to hold shares;but its R&D expenditure capitalization behavior will attract these kind of investors to increase their share-holdings.Finally,based on the findings and conclusion,this paper puts forward some suggestions on how to improve the R&D expenditure of listed companies through the governance of institutional investors,and makes some prospects for the future research direction.