Generalist vs. Specialist CEOs: R&D Investment Sensitivity to Stock Price

Heung-Jae Jeon and Sumi Jung

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: We investigate the propensity of chief executive officers (CEOs) with general abilities, as opposed to specialized abilities, to utilize stock market insights in their R&D investment decisions. By analyzing data from U.S. public companies from 1993 to 2022, we discover a positive relationship between the CEOs’ general managerial ability and R&D investment-price sensitivity, suggesting an increased reliance on stock price information among generalist CEOs in making investment decisions. We also find that this relationship is even more pronounced when the stock price reflects more private information and when the degree of a firm's business specificity increases. Our findings offer valuable insights into the potential channel that links generalist CEOs and firm innovation.

Keywords: General human capital; Managerial learning; R&D investment; Investment-price sensitivity (search for similar items in EconPapers)
JEL-codes: D83 G30 M10 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001119

DOI: 10.1016/j.frl.2024.105081

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