Corporate Governance Structure, Financial Capability, and the R&D Intensity in Chinese Sports Sector: Evidence from Listed Sports Companies

Abstract

Innovations are the foundation of an enterprise’s sustainable development, which is particularly important for sports firms in an evolving Chinese sport industrial environment. Analyzing publicly-listed sports firms on The New Third Board (NTB) in China, this study examined the influence of corporate financial capability and corporate governance structure on firms’ R&D intensity through a series of multiple regression models. Findings revealed that corporate financial capability is an important determinant of R&D intensity, and corporate governance structure has a small but meaningful effect on R&D intensity. Specifically, for Chinese sports firms, several financial capability indicators, such as return on equity, accounts receivable turnover, assets turnover, and profit growth rate, have positive relationships with R&D intensity; however, other financial capability indicators, such as leverage and cash flow, have negative relationships with R&D intensity. Limited evidence was found to support the notion that corporate governance significantly influences R&D intensity, although sports firms with good governance mechanisms are more likely to increase the positive effects of financial capabilities on R&D intensity while decreasing the negative effects. Discussions were centered on planning and executing R&D activities in sports companies.