The Impact Of Corporate Litigation Risk On Corporate Innovation

Company innovationplays an important role in the development of the company and even in promoting the progress of the society.Researches oncompany innovation is now relatively mature,including the research from the aspects of corporate governance,external environment,internal characteristics of the enterprise,etc.From the existing research results,company innovation is the result of a variety of factors.Litigation risk,as an external risk faced by the company,may have a certain impact on the company governance.Many studies show that due to the existence of principal-agent problem,the litigation risk of the company will cause the Short-sighted behaviors of the company’s management,that is,to exchange long-term interests for short-term interests.At the same time,some studies show that the litigation risk of the company will affect the accounting conservatism of the company.There are positive and negative controversies on the research of the influence results.Some researches find that the litigation risk of the company will lead to the earnings management of the management,reduce the accounting conservatism,and be beneficial to the financing activities of the listed company.On the other hand,some researches show that the litigation risk will lead to the company receiving more severe supervision,and the company owners getting this signal after the litigation,executives will be required to operate the company more cautiously and transparently,so it is believed that litigation risk will improve the accounting conservatism of the company.With the further improvement of the legal society,the stricter regulatory mechanism,and the development of the information society,the higher the risk of earnings management behavior of the company is.Therefore,most of the existing studies agree with the latter conclusion.Starting from litigation risk and accounting conservatism,this paper discusses how litigation risk affects corporate innovation through accounting conservatism,and analyzes the effect of accounting conservatism as an intermediary variable,Firstly,this paper reviews the influencing factors of company innovation,the relevant impact of litigation risk on the company,and the relevant research literature of accounting conservatism and earnings management.Then the text provides a theoretical basis for the relationship between litigation risk,accounting conservatism and corporate innovation research and development through principal-agent theory,information asymmetry theory,incentive theory and signal theory.It also draws on Basu,Khan’s research results on accounting conservatism,and Wen Zhonglin’s research results on intermediary effect,which is supported by methodology.Then this paper selects the listed companies in the high-tech industry from 2010 to 2016 as the research object,draws on the research results of Pan Yue and Mao Xinshu,establishes an empirical model,and examines the litigation risk and innovation research and development,litigation risk and accounting conservatism of listed companies,as well as the common relationship among them.This paper finds that:(1)the litigation risk faced by listed companies is positively related to accounting conservatism,that is,the higher the litigation risk is,the more cautious the company will be and the less earnings management will be.(2)The litigation risk faced by the company is negatively related to innovation and R&D,that is,the litigation risk of the company will cause the short-sighted behavior of the management,abandon the long-term interests of the company in exchange for short-term benefits.(3)The litigation risk of listed companies will affect innovation research and development by affecting accounting conservatism,that is to say,the litigation risk of listed companies makes the management more cautious in operation,thus inhibiting the innovation research and development of companies.