# How do inside directors affect corporate R&D investment? The moderating role of CEO equity incentives

## TL;DR

Inside directors boost corporate R&D investment, but this effect is reduced when CEOs have equity incentives.

## Contribution

The study reveals how CEO equity incentives moderate the impact of inside directors on R&D investment.

## Key findings

- Inside directors significantly promote corporate R&D investment.
- CEO equity incentives weaken the effect of inside directors on R&D investment.
- The effect is stronger in non-SOEs, with male and older CEOs, and smaller boards.

## Abstract

This study aims to reveal whether non-CEO inside directors can promote corporate research and development (R&D) investment. Using a panel data of 3,002 Chinese manufacturing listed firms from 2011 to 2021, we find that inside directors can significantly promote corporate R&D investment. We also find that when the CEO has equity incentives to alleviate agency conflicts, the role of inside directors in promoting R&D investment is significantly weakened. Additional analysis show that the promotive effect of inside directors on R&D investment is significant only in samples of non-state-owned enterprises (non-SOEs), male CEOs, older CEOs, and small boards, but not for the samples of state-owned enterprises (SOEs), female CEOs, younger CEOs, and large boards. These findings extend the scope of research on the economic consequences of inside directors and have important implications for the optimization and adjustment of corporate governance policies.