Incentive Differences,Exercise Constraints and Company Innovation:Evidence from Equity Incentives in Pharmaceutical Listed Companies
The innovation activities of pharmaceutical companies have the characteristics of high R&D investment,high risk,high return rate,and long cycle.How to carry out innovation incentives for pharmaceutical companies has become a key issue in improving their innovation performance.We use the data of listed pharmaceutical companies from 2009 to 2022 to explore the impact of equity incentives on innovation,and adopt the propensity score matching method and double difference model(PSM-DID)to test it,and from the micro perspective of incentive contract terms,we conduct a systematic analysis on the impact of design differences in incentive contract terms such as equity incentive gap,exercise validity period,and exercise performance evaluation conditions on company innovation.The study shows that equity incentives can significantly enhance the level of company innovation,and appropriately expanding the equity incentive gap is conducive to mobilizing the competitive enthusiasm of corporate members and enhancing the promotion of company innovation.The longer the exercise period of the incentive contract is,the more sustainable incentives and constraints can be formed for management and core employees,which in turn improves company innovation;the stricter the exercise performance evaluation is in the incentive contract,the stronger the motivation of earnings management and risk avoidance is,which in turn inhibits company innovation.
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