The investment of research and development is an important factor to improve the corporate competition level. The risk of innovation investment is relatively higher than the general capital expenditure. When the top management team plan on the investment of research and development, they usually afraid the failure of the R&D investment and the related financial risk. 

Based on the theory of the corporate financial constraints, the investment of research and development always follow by the financial risk. Does the investment of R&D increase the corporate financial uncertainty significantly? How much R&D investment is suitable for the Chinese company to avoid increasing the financial risk? 

In order to answer the above questions and test the hypothesis, we collected the panel data include 1983 samples of 661 Chinese listed company in manufacturing industry from the year 2013 to 2015. The three R&D variables include the research and development intensity (RDI) in which the R&D expenditure is divided by the sales income, the R&D density (RDA) which the R&D expenditure divided by the total assets, and the logarithm of R&D investment quantity (RDL). The long-term financial risk variables include the Altman Z score index and the standard deviation of operating net profit rate. The nonlinear models are used to test the relationship between the R&D and long-term financial risk.

The main results are shown as follows: Firstly, without considering the financial constraints, in most Chinese listed company of manufacturing industry, there is the U style relationship between the R&D density investment and the long-term financial risk. The general R&D investment will decrease the financial uncertainty. The long-term financial risk will increase after the R&D density point of 5.75%. These kinds of cases usually happened in the state-owned enterprise and large sized listed company of China. Secondly, under the condition of financial constrain, the money and resources of R&D investment is limited. The relationship is aggravated with the flat J shape correlation between the R&D and long-term financial risk. When the R&D intensity is around 3%, the long-term financial risk is minimum. The financial constrain will increase the affections between the R&D and financial risk. Especially in private and small sized company. Finally, and in briefly, for most company, there is a suitable R&D investment region level from 3% to 6% that not significantly increase the long-term financial risk.

The result is also checked through some robustness test. Some management suggestions for the decision makers are concluded. In order to balance the R&D investment and long-term financial risk, the top managers need to make the decision on the suitable R&D intensity and density based on their company′s income and assets conditions. Refer to the R&D investment region level, the volatility of the corporate financial pressure will not be changed significantly. The R&D policy makers also need to consider the corporate characteristics and size of income and assets to introduce the different incentive policy for innovation investment.