Managerial Discretion and Corporate Green Innovation
An Inverted U-Shaped Relationship under Non-Uniform Density
Abstract
As the central actors in corporate strategy formulation and resource allocation, managers exert a profound influence on a company’s green development. Against the backdrop of China’s policy-driven push for corporate green transformation, this study examines the impact of managerial discretion on corporate green innovation and its underlying mechanisms. Drawing on a sample of Chinese A-share listed companies from 2014 to 2023, the analysis integrates agency theory and stewardship theory, focusing on the formal authority granted to Chief Executive Officer by their boards of directors. Empirical results indicate that managerial discretion exhibits an inverted U-shaped relationship with corporate green innovation: moderate power stimulates stewardship behavior among managers, thereby promoting green innovation, whereas excessive power induces agency problems, which in turn exerts a suppressing effect. Mechanism analysis reveals that R&D investment serves as a key transmission channel and itself exhibits an inverted U-shaped relationship with green innovation. Heterogeneity analysis reveals that this effect is more pronounced in state-owned enterprises and under conditions of high environmental uncertainty. Therefore, firms should reasonably delegate authority to management and actively establish monitoring mechanisms for green R&D investment thresholds to precisely enhance green innovation capabilities.
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