Are over-paid Chief Executive Officers better innovators?

Habib Jouber ()
Additional contact information
Habib Jouber: University of Gabès

Journal of Economics, Finance and Administrative Science, 2013, vol. 18, issue 35, 63-71

Abstract: This paper focuses on the pay level of the highest paid executive directors, which we label as “Executive Director’s Organizational Level” (henceforth EDOL), to raise the question if highest paid CEOs invest heavily in innovative projects. Two-stage least squares (2SLS) regressions show that over-paid CEOs are more likely to invest in R&D projects. They highlight, moreover, both from a “statutory” and an “activist” perspective, that CEOs’ intends to invest in value-enhancing innovations are contingent upon compensation committee inde- pendence and investor protection level. Check tests reveal that the pay-performance “innovation” effect for option-based compensation is higher than that for stock-based compensation. Within the options (stocks) rewards, unvested options (restricted stocks) are the most effective. However, we find that over-paid CEOs of low-growth firms achieve less innovation compared to those of high-growth firms. Throughout, we reveal that the effect of CEOs performance-pay on innovation is mainly relevant among overconfident managers than non-overconfident ones.

Keywords: Chief Executive Officer; compensation Executive Director’s; Organizational Level; Research and Development expenditures; Patent citations (search for similar items in EconPapers)
JEL-codes: G30 G32 M41 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://zl.elsevier.es/en/revista/journal-of-econom ... ve-officers-90253427 Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:joefas:0063

Access Statistics for this article

Journal of Economics, Finance and Administrative Science is currently edited by Nestor U. Salcedo

More articles in Journal of Economics, Finance and Administrative Science from Universidad ESAN 1652 Alonso de Molina, Santiago de Surco 15023, Lima, Peru. Contact information at EDIRC.
Bibliographic data for series maintained by ESAN Ediciones ().