Change in sales, managerial overconfidence and persistence of firm R&D investment: evidence from China

Previous studies have discussed firm R&D investment widely, ignoring the asymmetric responses to different shocks and the influence of managers. And most of these studies were based on developed markets, with few based on emerging markets. Based on the Chinese A-share firms listed on the Shanghai and Shenzhen Stock Exchanges in 2008-2017, this paper analyzes the impact of change in sales and managerial overconfidence on R&D investment, finding that both changes in sales and managerial overconfidence are positively related to R&D investment and that managerial overconfidence negatively moderates the relationship between changes in sales and R&D investment. The empirical results show that managerial overconfidence acts as an important moderator to increase R&D persistence under different shocks in the emerging market context.