Executive Equity Incentive,Innovation Environment And Innovation Investment

Innovation is the power source of enterprise development,but the high risk and long cycle characteristics of innovation activities will put enterprises in a dilemma of whether to research and develop.The separation of ownership and management rights of modern enterprises has caused conflicts of interest between executives and shareholders.The risk-averse management tends to abandon innovative projects with positive net present value but high risks.As an important governance mechanism to coordinate the interests of shareholders and executives,equity incentives strengthen the "risk sharing,benefit sharing" mechanism between the two,and affect the willingness of enterprises to innovate.Based on the above analysis,this paper carries out the following research: First of all,we construct the indicators of executive wealth-stock return volatility sensitivity(Vega)and executive wealth-stock price sensitivity(Delta),and examine the effect of executive equity incentive on enterprise innovation investment from the perspective of executive risk bearing effect and the benefit synergy effect between executives and shareholders;Secondly,from the investment channel,we can prove how the executive equity incentive affects the innovation investment of enterprises;Thirdly,it analyzes how the innovation environment of the enterprise regulates the effect of the executive equity incentive on the innovation investment of the enterprise;Finally,based on the sample of A-share listed companies from 2007 to 2020,this paper conducts empirical research on the above theories.The main conclusions include:(1)Higher Vega significantly promotes enterprise innovation investment,but Delta does not significantly promote enterprise innovation investment.In general,the equity incentive for senior executives improves the level of innovation investment by enhancing the willingness of senior executives to take risks.(2)Equity incentives change the shortsighted investment behavior of senior executives by improving their risk-taking level,making them reduce their investment in physical assets and financial assets,and use more resources for enterprise innovation projects.(3)The better the comprehensive innovation environment in the region where the enterprise is located,the stronger the positive impact of equity incentives on the enterprise’s innovation investment,in which the market environment,financial environment and the quality environment of workers play a more significant role in regulating.The main three marginal contributions of this paper are as follows: First,the evaluation of the executive equity incentive effect is based on the value of the option portfolio,taking full account of the cross sectional changes in the maturity time,volatility,exercise quantity and exercise price.Distinguish the incentive of different incentive objects(stock options and restricted stocks)in the equity incentive scheme and combine them to obtain two sensitivity indicators(Delta and Vega),and study the effect of equity incentive from multiple perspectives;The second is to enrich the theoretical mechanism explanation of how the equity incentive of senior executives affects the innovation activities of enterprises.The empirical results show that the equity incentive restrains the investment shortsightedness of senior executives and makes them promote the investment in enterprise research and development by squeezing out the investment channels of fixed assets and financial assets.Enriched and expanded the mechanism explanation of executive equity incentive to enterprise innovation;The third is to examine how to adjust the effect of executive equity incentive on enterprise innovation from multiple aspects of the innovation environment.