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Financial slack, institutional shareholding and enterprise innovation investment: evidence from China

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  • Ke Zhang
  • Jenny Jing Wang
  • Yanqi Sun
  • Sarowar Hossain

Abstract

This study examines how institutional shareholding affects the relationship between financial slack and corporate investment in innovation for Chinese A‐share listed companies. We find that financial slack significantly increases corporate innovation investment. Pressure‐resistant institutions do not moderate the relation but pressure‐sensitive institutions do moderate the relation negatively. We further find that financial slack affects beneficially results because of the employment of slack resources after an exogenous negative shock like COVID‐19/Global Financial Crisis. Our findings contribute to the literature on the cross‐sectional variation on the relationship between companies’ strategies and accounting choices in China.

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  • Ke Zhang & Jenny Jing Wang & Yanqi Sun & Sarowar Hossain, 2021. "Financial slack, institutional shareholding and enterprise innovation investment: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3235-3259, June.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:2:p:3235-3259
    DOI: 10.1111/acfi.12700
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    2. Tan, Yafei & Zhu, Zhaohui, 2024. "The internationalization of capital market and corporate innovation capabilities: A quasi-natural experiment on the inclusion of China's A-shares in the MSCI index," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1021-1038.
    3. Wu, Lichao & Wei, Yingqi & Wang, Chengang & McDonald, Frank & Han, Xia, 2022. "The importance of institutional and financial resources for export performance associated with technological innovation," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    4. Shuxia Zhang & Liping Xu & Ning Liu, 2022. "Crowding‐in and crowding‐out effects of corporate philanthropy on R&D investment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1835-1849, September.
    5. Haidong Li & Ziming Qian & Shanyong Wang & Jing Wang & Qian Wang, 2023. "Do green concerns promote corporate green innovation? Evidence from Chinese stock exchange interactive platforms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1786-1801, April.
    6. Mehdi Bensouda & Mimoun Benali, 2022. "Overcoming Risk Aversion Regarding Energy Efficiency Practices through Mimetic Pressure and Financial Slack: Findings from the Moroccan Manufacturing Sector," Sustainability, MDPI, vol. 14(23), pages 1-15, December.
    7. Yuan, Dongliang & Shang, Duo & Ma, Yufei & Li, Dehui, 2022. "The Spillover Effects of Peer Annual Report Tone for Firm Innovation Investment: Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 177(C).

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