Corporate Governance Indicators and Innovation in the Chinese Market
DOI:
https://doi.org/10.54097/155b2v72Keywords:
Corporate innovation, corporate governance, Chinese market.Abstract
The importance of innovation as an indispensable driving force for the development of a quality economy, for the sustainability of national economies and for the support of enterprises in breaking through development bottlenecks cannot be overstated. Innovation is a key growth strategy for all businesses. It is centered on the chief executive officer (CEO) and is directly related to the cognitive level and decision-making preferences of executives. Based on the principal-agent theory and Upper Echelons Theory, this paper constructs a model to evaluate the impact of CEOs on corporate innovation using a sample of Chinese listed companies from 2008 to 2022. Based on China's political and economic system, this paper selects six relevant characteristics of CEOs, including gender, age, educational background, tenure, compensation and political affiliation to decide whether the CEO is suitable for the firm. At the same time, this paper also measures corporate innovation standards by the number of patents filed by the company, and thus finds that the CEO index has a positive and significant impact on corporate innovation. In addition, in order to address the endogeneity issue, the paper also applies a series of robustness tests, including alternative measures of firm innovation and alternative models (Poisson models), and finds that the results are consistent with the main regression results. Finally, the paper provides empirical evidence as a means of demonstrating the key driving role played by CEOs in corporate innovation. The implications of the above findings for corporate governance, including board shareholders and policymakers, are clear.
Downloads
References
Bao Xiaona,Fan Xiaonan. Financialization, technological innovation and productivity enhancement of real firms--an empirical study based on Chinese listed companies[J]. Science and Technology Management Research,2023,43(08):133-143.
Li Guang,Ling Ying. Digital economy, corporate R&D investment and technological innovation performance[J]. Journal of Jilin College of Commerce and Industry,2023,39(03):40-47.DOI:10.19520/j.cnki.issn1674-3288.2023.03.003.
Lai W.-J., Cheng, M.-N.. Substantive or Strategic Innovation? --The impact of macro-industrial policy on micro-firm innovation[J]. Economic Research,2016,51(04):60-73.
Li Jian,Gong Yuxia. A study on the relationship between executive team characteristics, firm size and innovation performance--an empirical analysis based on artificial intelligence listed companies[J]. Enterprise Technology and Development,2023(03):106-110.
NIE Changfei,FENG Yuan,SONG Dandan. Patents and the quality of China's economic growth--Based on the dual perspectives of innovation quantity and quality[J]. Macro Quality Research, 2022, 10(03): 47-62. DOI:10.13948/j.cnki.hgzlyj.2022.03.004.
Qi Yongxin. Research on the Impact of Chinese Government Innovation Subsidies on Corporate Innovation[D]. Central University of Finance and Economics, 2023.DOI:10.27665/d.cnki.gzcju.2021.000094.
Zhang Zairan. The impact of female education level and family dependency ratio on female labor force participation rate in countries along the "Belt and Road" - Data from CSMAR "Belt and Road" 68 countries 2010- 2018[J]. 2018[J]. Business Economics,2023(06):147-148+175.DOI:10.19905/j.cnki.syjj1982.2023.06.046.
Adhikari, A., Derashid, C. and Zhang, H., 2006. Public policy, political connections, and effective tax rates: longitudinal evidence from Malaysia. Journal of Accounting and Public policy, 25(5), pp.574-595.
Aguilera, R.V. and Crespi-Cladera, R., 2016. global corporate governance: on the relevance of firms' ownership structure. journal of World Business, 51(1), pp. 50-57.Artz, K.W., Norman, P.M.,
Ahn, J.M., Minshall, T. and Mortara, L., 2017. understanding the human side of openness: the fit between open innovation modes and CEO characteristics. r &D Management, 47(5), pp.727-740
Barker III, V.L. and Mueller, G.C., 2002. CEO characteristics and firm R&D spending. Management Science, 48(6), pp.782-801.
Benlemlih, M. and Bitar, M., 2018. corporate social responsibility and investment efficiency. journal of Business Ethics, 148(3), pp.647-671.
Bhaumik, S., Driffield, N., Gaur, A., Mickiewicz, T. and Vaaler, P., 2019. corporate governance and MNE strategies in emerging economies. journal of World Business, 54(4), pp.234-243
Biscotti, A.M., Mafrolla, E., Del Giudice, M. and D'Amico, E., 2018. CEO turnover and the new leader propensity to open innovation: agency- resource dependence view and social identity perspective. management Decision.
Bottazzi, L. and Peri, G., 2003. Innovation and spillovers in regions: Evidence from European patent data. European economic review, 47(4), pp.687-710 .
Bronzini, R. and Piselli, P., 2016. the impact of R&D subsidies on firm innovation. research policy, 45(2), pp.442-457.
Carpenter, M.A., Geletkanycz, M.A. and Sanders, W.G., 2004. Upper echelons research revisited: antecedents, elements, and consequences of top management team composition. Journal of management, 30(6), pp.749-778.
Chen, J., Leung, W.S. and Evans, K.P., 2018. female board representation, corporate innovation and firm performance. journal of Empirical Finance, 48,. pp.236-254.
Chen, W.T., Zhou, G.S. and Zhu, X.K., 2019. CEO tenure and corporate social responsibility performance. Journal of Business Research, 95, pp.292-302.
Claessens, S., Feijen, E. and Laeven, L., 2008. political connections and preferential access to finance: the role of campaign contributions. journal of financial economics, 88(3), pp.554-580.
Coad, A., Segarra, A. and Teruel, M., 2016. Innovation and firm growth: does firm age play a role? Research policy, 45(2), pp.387-400.
Crosby, M., 2000. patents, innovation and growth. economic Record, 76(234), pp.255-262
Cucculelli, M. and Ermini, B., 2013. risk attitude, product innovation, and firm growth. evidence from Italian manufacturing firms. economics Letters , 118(2), pp. 275-279.Daily, C.M., Dalton, D.R. and Rajagopalan, N., 2003. governance through ownership: centuries of practice, decades of research. Academy of Management Journal, 46(2), pp.151-158.
Dang, J. and Motohashi, K., 2015. Patent statistics: a good indicator for innovation in China? Patent subsidy program impacts on patent quality. china Economic Review, 35, pp.137-155.
De Visser, M. and Faems, D., 2015. exploration and exploitation within firms: the impact of CEO s' cognitive style on incremental and radical innovation performance. creativity and innovation management, 24(3), pp.359-372.
Donoso, J.F., 2017. a simple index of innovation with complexity. journal of informetrics, 11(1), pp.1-17.
El Ghoul, S., Guedhami, O., Kwok, C.C. and Mishra, D.R., 2011. does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35(9), pp.2388-2406.
Evangelista, R., 2006. Innovation in the European service industries. Science and Public Policy, 33(9), pp.653-668
Faccio, M., Marchica, M.T. and Mura, R., 2016. CEO gender, corporate risk-taking, and the efficiency of capital allocation. journal of corporate finance, 39, pp.193-209.
Fan, S. and Wang, C., 2019. firm age, ultimate ownership, and R&D investments. international Review of Economics & Finance.
Fang, L.H., Lerner, J. and Wu, C., 2017. Intellectual property rights protection, ownership, and innovation: evidence from China. the Review of Financial Studies, 30(7), pp.2446-2477.
Galasso, A. and Simcoe, T.S., 2011. CEO overconfidence and innovation. management Science, 57(8), pp.1469-1484.
González-Uribe, J. and Groen-Xu, M., 2017. CEO contract horizon and innovation. available at SSRN 2633763.
Hambrick, D.C. and Mason, P.A., 1984. Upper echelons: The organization as a reflection of its top managers. academy of management review, 9(2), pp.193- 206.
Hasan, I. and Tucci, C.L., 2010. the innovation-economic growth nexus: global evidence. research policy, 39(10), pp.1264-1276.
Mezghanni, B.S., 2010, May. How CEO attributes affect firm R&D spending? New evidence from a panel of French firms. In Crises et nouvelles problématiques de la Valeur (pp. CD-ROM). In Crises et nouvelles problématiques de la Valeur (pp. CD-ROM)
Hou, Q., Hu, M. and Yuan, Y., 2017. corporate innovation and political connections in Chinese listed firms. Pacific-Basin Finance Journal, 46, pp.158- 176.
Huang, J. and Kisgen, D.J., 2013. Gender and corporate finance: are male executives overconfident relative to female executives? Journal of financial Economics, 108(3), pp.822-839.
He, J.J. and Tian, X., 2013. the dark side of analyst coverage: the case of innovation. journal of financial economics, 109(3), pp.856-878.
Jensen, M.C. and Meckling, W.H., 1976. Theory of the firm: managerial behavior, agency costs and ownership structure. journal of financial economics, 3 (4), pp.305-360.
Jiang, F., Jiang, Z. and Kim, K.A., 2020. capital markets, financial institutions, and corporate finance in China. journal of corporate finance, 63, p. 101309. Journal of Corporate Finance, 63, p.101309.
Jiang, N., 2017. should directors have term limits?-Evidence from corporate innovation. European Accounting Review, 26(4), pp.755-785 .
Johannessen, J.A., Olsen, B. and Lumpkin, G.T., 2001. Innovation as newness: what is new, how new, and new to whom? European Journal of innovation management.
Karabulut, A.T., 2015. effects of innovation strategy on firm performance: a study conducted on manufacturing firms in Turkey. Procedia-Social and Behavioral Sciences, 195, pp.1338-1347.
La Porta, R., Lopez-de-Silanes, F. and Shleifer, A., 1999. corporate ownership around the world. the journal of finance, 54( 2), pp.471-517.
Liu, X., 2014. Accelerate the development of science and technology service industry, leveraging innovation-driven. [online] Gov.cn. Available at: & lt;http://www.gov.cn/xinwen/2014-08/20/content_2737719.htm> [Accessed 22 August 2021].
Lin, C., Lin, P., Song, F.M. and Li, C., 2011. Managerial incentives, CEO characteristics and corporate innovation in China's private Journal of comparative economics, 39(2), pp.176-190.
Does foreign technology transfer spur domestic innovation? Evidence from the high-speed rail sector in China. Journal of Comparative Economics, 49(1), pp. 212-229. Journal of Comparative Economics, 49(1), pp.212-229.
Manso, G., 2011. Motivating innovation. The Journal of Finance, 66(5), pp.1823-1860.
Mazouz, K. and Zhao, Y., 2019. CEO incentives, takeover protection and corporate innovation. British Journal of Management, 30(2), pp.494-515.
Nemlioglu, I. and Mallick, S., 2021. effective innovation via better management of firms: the role of leverage in times of crisis. research policy, 50(7) Research Policy, 50(7) , p.104259.
Nguyen, L., Vu, L. and Yin, X., 2020. the undesirable effect of audit quality: Evidence from firm innovation. the British Accounting Review, 52(6),. The British Accounting Review, 52(6), p.100938.
Ozkan, N., 2011. CEO compensation and firm performance: an empirical investigation of UK panel data. European Financial Management, 17(2), pp.260-285 .
Rauch, A. and Frese, M., 2000. Psychological approaches to entrepreneurial success. in International review of industrial and organizational psychology (pp. 101-142). Wiley.
Ren, S., Cheng, Y., Hu, Y. and Yin, C., 2021. Feeling right at home: Hometown CEOs and firm innovation. Journal of Corporate Finance, 66, p.101815.
Sarfraz, M., He, B. and Shah, S.G.M., 2020. Elucidating the effectiveness of cognitive CEO on corporate environmental performance: the mediating role Environmental Science and Pollution Research, 27(36), pp.45938-45948.
Seybert, N., 2010. R&D Capitalization and Reputation-Driven Real Earnings Management (Partially Retracted). The Accounting Review, 85(2), pp.671-693.
Shleifer, A. and Vishny, R.W., 1997. a survey of corporate governance. the journal of finance, 52(2), pp.737-783.
Simsek, Z., Veiga, J.F., Lubatkin, M.H. and Dino, R.N., 2005. Modeling the multilevel determinants of top management team behavioral integration. Academy of Management Journal, 48(1), pp.69-84.
Singh, M. and Faircloth, S., 2005. the impact of corporate debt on long term investment and firm performance. applied Economics, 37(8), pp.875-883.
Stock, J., Yogo, M. and Andrews, D.W., 2005. Testing for Weak Instruments in Linear IV Regression. Identification and Inference for Econometric Models.
Sun, Y., Lu, Y., Wang, T., Ma, H. and He, G., 2008. Pattern of patent-based environmental technology innovation in China. Technological Forecasting and Technological Forecasting and Social Change, 75(7), pp.1032-1042.
Vieito, J.P.T., 2012. gender, top management compensation gap, and company performance: tournament versus behavioral theory. corporate governance. An International Review, 20(1), pp.46-63.
Willebrands, D., Lammers, J. and Hartog, J., 2012. A successful businessman is not a gambler. risk attitude and business performance among small enterprises in Nigeria. Journal of Economic Psychology, 33(2), pp.342-354.
Wu, B., Liang, H. and Shen, Y., 2018. Political connection, ownership, and post-crisis industrial upgrading investment: evidence from China. emerging Markets Finance and Trade, 54(12), pp.2651-2668
Yam, R.C., Lo, W., Tang, E.P. and Lau, A.K., 2011. Analysis of sources of innovation, technological innovation capabilities, and performance: an empirical study of Hong Kong manufacturing industries. Research policy, 40(3), pp.391-402
Zhu, J., Ye, K., Tucker, J.W. and Chan, K.J.C., 2016. board hierarchy, independent directors, and firm value: evidence from China. journal of corporate Finance, 41, pp.262-279.
Zhou, Z. and Pan, D., 2018. can corporate innovation restrain the stock price crash risk? Journal of Financial Risk Management, 7(1), pp.39-54.
Downloads
Published
Issue
Section
License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
How to Cite
