  Based on principal-agent theory and optimal contract theory, companies use
the method of increasing executives' shareholding to stimulate collaborative
innovation. However, from the aspect of agency costs between management and
shareholders (i.e. the first type) and between major shareholders and minority
shareholders (i.e. the second type), the interests of management, shareholders
and creditors will be unbalanced with the change of the marginal utility of
executive equity incentives.In order to establish the correlation between the
proportion of shares held by executives and investments in corporate
innovation, we have chosen a range of publicly listed companies within China's
A-share market as the focus of our study. Employing a multi-variable linear
regression model, we aim to analyze this relationship thoroughly.The following
models were developed: (1) the impact model of executive shareholding on
corporate innovation investment; (2) the impact model of executive shareholding
on two types of agency costs; (3)The model is employed to examine the mediating
influence of the two categories of agency costs. Following both correlation and
regression analyses, the findings confirm a meaningful and positive correlation
between executives' shareholding and the augmentation of corporate innovation
investments. Additionally, the results indicate that executive shareholding
contributes to the reduction of the first type of agency cost, thereby
fostering corporate innovation investment. However, simultaneously, it leads to
an escalation in the second type of agency cost, thus impeding corporate
innovation investment.
