Technological Innovation And Cost Of Equity Capital

With the economic transformation and upgrading of our country and the advancement of capital market reforms,the importance of the innovation-driven strategy for economic development was emphasized again at the 2019 Central Economic Work Conference.Enterprise technological innovation requires the support of large amounts of long-term capital,the capital market plays a platform role in helping innovation driven strategy,and pricing for innovation capability is the key to whether capital market can effectively serve technological innovation.Compared with debt financing,equity financing plays a more significant role in supporting technological innovation.It is particularly important to study how to reduce the cost of equity capital and obtain the advantages of equity financing.Technological innovation with high returns and high risks may affect the cost of equity capital in two different directions.On the one hand,companies can improve the core competitiveness and trigger positive reactions of investors by increasing the intensity of R&D investment and the output of innovation patents;On the other hand,investors will also seek higher risk compensation for the high-risk characteristics of technological innovation.So,this paper explores will technological innovation ultimately increase or decrease the cost of equity capital? In addition,the positive value effect of technological innovation can not be achieved without the strong support of scientific decision-making of the enterprise.As the maker of enterprise production decisions,management leads the long-term value investment of technological innovation,and the reasonable and effective incentive to the management is the key measure to promote the positive innovative cost-of-capital effect.The existing management incentive system in China is mainly based on short-term management compensation incentives and long-term management equity incentives,and the different management incentives have different incentive effects.Based on this,this paper further explores the relationship between technological innovation and cost of equity capital under different management incentive modes and whether there are differences in their action paths.Taking the 2007-2016 Shanghai-Shenzhen A-share non-financial industry listed company as a research sample,combining management incentives of the internal governance mechanism,this paper makes a deep analysis of the objective performance and transmission paths of the impact of technological innovation on the cost of equity capital.The research results show that:(1)Technological innovation is negatively related to the cost of equity capital.That is to say,increasing innovation input and innovation output can effectively reduce the cost of equity capital.(2)The difference of incentive intensity of management incentives influences the relationship between technological innovation and cost of equity capital,and the regulating effects of different management incentives on the relationship between technological innovation and cost of equity capital are also different.Compensation incentive weakens the negative correlation between technological innovation and cost of equity capital,while equity incentive has a strengthening effect on the negative correlation between them.(3)Further intermediary test shows that technological innovation can reduce the cost of equity capital through "competitiveness enhancement effect" and "investor concern effect",while the intermediary effect of "operational risk effect" brought by the uncertainty of innovation is not significant.(4)In-depth research found that "competitiveness enhancement effect" and "investor concern effect" play a conductive role in the impact of management incentive on innovative cost-of-capital effect.From the perspective of the cost of equity capital,this paper studies the positive capital market effect of technological innovation.On the one hand,it enriches the related research on the cost of equity capital and technological innovation.On the other hand,it provides some empirical evidence for enterprises to formulate reasonable and effective innovation development strategies and obtain equity financing advantages.From the perspective of internal governance of enterprises,combined with management incentives,this paper further analyzes the changes in the relationship between technological innovation and the cost of equity capital,which is more targeted and makes it easier for new economic enterprises to refine the management incentive system to provide effective internal resources and strategic support for innovation.In addition,the practical significance of this paper is also reflected in how to optimize the investment decision of innovation for investors and how to standardize the management of innovation risk for regulators.