Abstract
Based on the principal-agent theory and the financial management theory, this study analyzes the impact of fund shareholding on corporate insufficient R&D input, and explores the action mechanism of fund shareholding on corporate innovation activities. The results show that fund shareholding is helpful to inhibit the insufficient R&D input. Moreover, this inhibiting effect is mainly reflected in the case of higher risk of financial failure. The further analyses show that the higher level of marketization strengthens the inhibiting effect of fund shareholding on insufficient R&D input. Finally, it is suggested that fund companies should be encouraged to hold shares of listed companies, and the proposal power of fund companies in the shareholders’ meeting should be appropriately enhanced. And it is suggested that the regulators continue to promote the development of securities investment funds, and guide fund shareholding to play an active role in external governance. Also, it is suggested that the regulators promote the process of regional marketization, to strengthen the positive effect of fund shareholding on innovation activities.
Highlights
Innovation is a primary driving force for development and the strategic underpinning for building a modern economic system
This result do not support the conclusion of Wen and Feng (2012) [9], Lai and Sun (2017) [10] that securities investment funds have a negative impact on corporate innovation
It is an important mechanism for fund shareholding to promote corporate innovation to alleviate insufficient R&D input when the risk of financial failure is higher
Summary
Innovation is a primary driving force for development and the strategic underpinning for building a modern economic system. As the leading force of institutional investors, securities investment funds actively participate in corporate governance, supervise the management and restrict the behavior of major shareholders, and exert governance effect to alleviate agency conflicts [22,23,24], and reduce the agency costs [25]. It is difficult to succeed in innovation activities [37] In this case, as “informed traders” with information advantage, fund companies have a better understanding of corporate fundamentals and other information than ordinary investors in the market, and can effectively evaluate corporate value, promoting enterprises to carry out valuable investments [38, 39]. Securities investment funds have the motivation and ability to promote enterprises to increase R&D input, choose the innovation project reasonably to enhance corporate value. Fund shareholding is more helpful to inhibit insufficient R&D input when the risk of financial failure is aggravated
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