The Correlation between Enterprise Internal Control Quality and Research and Development Investment Intensity.

Abstract

Innovation is the driving force behind enterprise development. Improving the quality of the internal control of enterprises and increasing the intensity of R&D investment are important ways to enhance the level of scientific and technological innovation. Based on the data of Shanghai and Shenzhen A-share listed companies from 2010 to 2019, in this paper, we empirically examine the correlation between the quality of internal control and the intensity of R&D investment by using the level of corporate cash holdings as an intermediary variable. We find that high internal control quality can improve cash-holding level and that improving cash-holding level will increase R&D investment intensity. That is, cash-holding level has a mediating effect between internal control quality and R&D investment intensity, while internal control quality can have a direct or indirect positive effect on R&D investment. Accordingly, this study has important theoretical significance and practical value for enterprises that seek to promote R&D innovation and improve their internal control.