The role of innovation investment and executive incentive on financial sustainability in tech-capital-labor intensive energy company: Moderate effect

Abstract

As an essential way to alleviate the principal–agent issue, the executive incentive not only guides the innovation activities but also affects the financial performance of enterprises. In conjunction, senior managers are the core personnel of enterprise operation and hold strategic decision-making power. Therefore, this paper aims to explore the bidirectional relationship between innovation investment and financial sustainability and the moderate effect of executive incentive in the energy industry. The results show that innovation investment has heterogeneity effects on business performance in different type energy companies on different periods. In other hands, salary incentive has a significant positive moderate impact on the relationship between innovation investment and financial sustainability, especially in technology-intensive companies. Equity incentive does not show significant moderate effect in the whole sample and sub-sample. This paper proposes a new research perspective on the relationship between innovation investment and financial sustainability, which has a practical significance to weigh innovation expenditure and corporate target performance and design an executive incentive mechanism.

Keywords

• Innovation investment (INI)
• Financial sustainability (FS)
• Executive incentive (EXI)
• Endogenous relationship
• Energy sector