The impact of financial flexibility and directors' academic experience on corporate R&D investments: a quantile regression approach

This study investigates the impact of financial flexibility and academic experience of a firm's board on corporate R&D investments in China. It also explores the moderating role of directors' academic experience on the relationship between financial flexibility and R&D investments....

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Bibliographic Details
Published in:Applied economics 2022-04, Vol.54 (17), p.1974-1988
Main Authors: Feng, Chai Bin, Mirza, Sultan Sikandar, Ahsan, Tanveer, Gull, Ammar Ali
Format: Article
Language:English
Subjects:
Causality
China
Companies
Directors
Directors' academic experience
Economic analysis
Economic theory
financial flexibility
Flexibility
General Finance
Investments
Longitudinal studies
Panel data
Quantitative Finance
R&D
R&D investments
Research & development
Stock exchanges
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Summary:This study investigates the impact of financial flexibility and academic experience of a firm's board on corporate R&D investments in China. It also explores the moderating role of directors' academic experience on the relationship between financial flexibility and R&D investments. We apply ordinary least square, fixed effects and quantile regression analysis using panel data of 2,195 A-share firms listed on Shanghai and Shenzhen stock exchanges during the period from 2011 to 2018. We find that both financial flexibility and directors' academic experience promote R&D investments of Chinese non-financial firms. We also observe that directors' academic experience weakens the positive impact of financial flexibility on R&D investments for firms operating in underdeveloped financial regions, whereas it strengthens the positive impact of financial flexibility on R&D investments for firms operating in developed financial regions. Our quantile regression results suggest that academic experience has a highly significant positive moderating impact on the financial flexibility of lower R&D investment firms relative to high R&D investment firms. These results are robust to alternate proxy of financial flexibility and endogeneity issues due to reverse causality.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2021.1983145