Managerial equity incentives and R&D investments in emerging economies: study based on threshold effects

Abstract

ABSTRACT Do managerial equity incentives benefit or impede R&D investments? To address this question and the inconsistent empirical findings on the topic, this study investigates the relationship between equity incentives and R&D investments as well as the threshold effects of some contextual factors. Our study evidence a curvilinear inverted U-shaped relationship between equity incentives and R&D investments by using GMM system estimators for a sample of 158 Chinese firms for the 2006–2018 period. Our findings also indicated that the influence of equity incentives on R&D investments is constrained by contextual factors such as financial slack and equity concentration, suggesting that financial slack plays a double threshold effect on the above relationship, while equity concentration performed a significant single threshold effect.