Equity incentive plans and R&amp;D investment manipulation: evidence from China

Zhang, Weidong; Pengbo, Hu; Wang, Jenny Jing; Li, Zeyu; Zheng, Hongrui; Gao, Xue

doi:10.1111/acfi.12919

Cited by 12 publications

(9 citation statements)

References 47 publications

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“…Heterogeneity analysis underscored the more pronounced innovation incentive effect of higher executive equity compensation in non-stateowned firms and those in highly marketized regions. Wang, et al [59] dissected the mechanisms through which equity incentives operate, identifying the "risk-taking" and "golden handcuffs" effects. Equity incentives impacted firms' investment in exploratory innovation primarily through the "risk-taking" effect, while their influence on utilizing innovation was attributed to the "golden handcuffs" effect.…”

Section: Plos Onementioning

confidence: 99%

Research on the impact of equity incentive model on enterprise performance: A mediating effect analysis based on executive entrepreneurship

Ma,

Wang

2024

PLoS ONE

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In implementing the equity incentive system, this paper delves into the listed enterprises’ selection of equity incentive models. While previous research has extensively covered the effects, models, and influencing factors of equity incentives, there needs to be more in-depth literature focusing on the diverse incentive models and their impact on corporate performance. Notably, there needs to be more literature on considering entrepreneurial spirit as a mechanism. It aims to explore the relationship between executives’ choices under different incentive models, the entrepreneurial spirit fostered by these models, and their combined impact on corporate performance. The findings reveal that adopting the restricted stock incentive model by listed enterprises implementing the equity incentive system significantly positively affects enterprise performance. Mechanistic tests show that when a company implements the restricted stock incentive model, executives prioritize maximizing their interests, leading them to embrace more risk in their investment decisions. This behavior, in turn, stimulates the adventurous spirit of executives, positively impacting enterprise performance, particularly pronounced in companies with more concentrated executive power. Moreover, executives may be more inclined to invest in high-risk, high-reward innovative projects, a behavior indicative of innovation and more prevalent in firms with higher research and development (R&D) investment. However, the limitation of this paper is that the study evaluates the operation of the equity incentive system in China by taking listed companies in China as an example, which is not necessarily suitable for foreign developed capitalist countries. This study contributes to the study of principal-agent problems by exploring the relationship between executives, entrepreneurship and firm performance.

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Section: Plos Onementioning

confidence: 99%

Research on the impact of equity incentive model on enterprise performance: A mediating effect analysis based on executive entrepreneurship

Ma,

Wang

2024

PLoS ONE

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“…Chen et al, 2015) show that CEO equity-based compensation incentive has a positive impact on accruals-based earnings management but a negative impact on real activities earnings management, implying that the equity-based compensation incentive leads executives to use more accrualsbased earnings management but less real activity earnings management. Zhang et al (2022) also found that companies with equity incentives, where managers have more power, are more inclined to opt for the more concealed means of real earnings management and try to avoid accrual earnings management, which may entail higher regulatory costs and greater litigation risk with tightening accounting regulations. Board members with more accounting comparability can lower information acquisition costs through more precise performance comparisons with peer firms and will monitor CEOs more effectively (Choi and Suh, 2019).…”

Section: Ceo Incentive Plans and Accounting Comparabilitymentioning

confidence: 99%

The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence

Arianpoor,

Efazati

2023

ARA

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PurposeThe present study investigates the impact of accounting comparability on chief executive officer (CEO) incentive plans and the moderating role of board independence for companies listed in Tehran Stock Exchange (TSE).Design/methodology/approachThe information about 177 companies in 2014–2021 was examined. In this study, equity-based compensation and cash-based compensation were used as the CEO incentive plans. The equity-based compensation was calculated through the ownership of the CEO shares.FindingsThe results suggest that the higher accounting comparability increases not only CEO equity-based compensation, but also cash-based compensation. Board independence also strengthens the relationship between accounting comparability and CEO compensation. Hypothesis testing based on robustness checks confirmed these results.Originality/valueThe paper is pioneering, to the authors' knowledge, in identifying how board independence moderates the impact of accounting comparability on CEO compensation. The findings provide insights into economic consequences to the firm related to accounting comparability and board monitoring. The results have important practical implications for international investors to evaluate accounting comparability, corporate governance mechanisms and CEO incentives.

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“…This results in better performance in innovation quality. We follow previous studies (Zhang et al, 2022c) and divide our research samples based on whether the company has implemented an equity incentive plan. We designate those samples as "1" if an equity incentive plan exists and "0" otherwise.…”

Section: Additional Analysismentioning

confidence: 99%

Board's informal hierarchy: influences on enterprise innovation quality

Meng,

Li,

Wang

2023

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PurposeUtilizing the expectation states theory in sociology, this study probes into the influence of the board's informal hierarchy on the quality of enterprise innovation, originating from the perspective of internal directorial interactions, while analyzing the boundary effects exhibited by the nature of property rights and the intensity of geo-culture.Design/methodology/approachThe study selects China's A-share listed companies from 2008 to 2021 as the research sample, employing the Tobit regression analysis method to scrutinize the hypotheses presented in the text.FindingsThe regression results demonstrate a positive correlation between the board's informal hierarchy and the enterprise innovation quality (EIQ). Upon introducing variables specific to property rights and geographical culture, the authors found that in comparison to non-state-owned enterprises (non-SOEs), the influence of the board's informal hierarchy on the quality of corporate innovation is diminished in SOEs. Conversely, the intensity of geo-culture across Chinese provinces enhances their mutual positive influence. In the additional analysis, the authors also found that the elevation of corporate risk tolerance is a significant pathway for the positive effect of the board's informal hierarchy on EIQ. Moreover, this positive influence is more profound in high-tech enterprises, businesses implementing equity incentive plans and companies that have subscribed to director and officer liability insurance.Originality/valueThe findings not only deepen the understanding of how the board's internal status characteristics influence corporate decision-making but also enrich the application scope of expectation states theory. Furthermore, this study offers valuable guidance for optimizing innovation decision-making by adjusting the personnel structures of corporate boards.

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Equity incentive plans and R&D investment manipulation: evidence from China

Cited by 12 publications

References 47 publications

Research on the impact of equity incentive model on enterprise performance: A mediating effect analysis based on executive entrepreneurship

Research on the impact of equity incentive model on enterprise performance: A mediating effect analysis based on executive entrepreneurship

The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence

Board's informal hierarchy: influences on enterprise innovation quality

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