The Impact of Social Security Fund & Insurance Fund on Corporate Innovation

Using the data of all listed Chinese companies from 2009 to 2014, this paper examines the impact of two typical long-term returns preferred funds, Social Security Fund and Insurance Fund, on corporate innovation. Both research and development (R&D) expenses and patents acquired by a company are adopted in this study to measure innovation input and output respectively. Our findings indicate that the shareholdings of both Social Security Fund and Insurance Fund can prompt a firm's innovation in general. Furthermore, the impact of the two funds vary from state-owned enterprises (SOE) and non-state-owned enterprises (non-SOE). In particular, Social Security Fund and Insurance Fund play a significantly positive role in enhancing corporate innovation performance in non-SOE while they don't improve innovation performance of SOE significantly. These empirical findings highlight the positive effects of Social Security Fund and Insurance Fund on corporate innovation, and will be of value to policy-makers in emerging markets in gauging the important drivers of corporate innovation ability.