Can fund shareholding inhibit insufficient R&D input?——Empirical evidence from Chinese listed companies

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.