Measuring R&D curtailment among short-horizon CEOs

Richard A. Cazier

Journal of Corporate Finance, 2011, vol. 17, issue 3, 584-594

Abstract: I review evidence produced by prior literature on CEO horizon problems and show that prior empirical findings are correlated with the research design employed. I find that evidence of R&D curtailment by CEOs as they approach retirement stems predominantly from cross-sectional correlations between CEO age or tenure and R&D spending. Using a broad sample of CEOs of S&P 1500 firms, I identify two factors that confound the cross-sectional relationship of firm R&D spending on CEO age or tenure which can lead to spurious inferences regarding the CEO horizon problem. I find that tracking R&D spending by the same CEOs over time produces no evidence of R&D curtailment. These results have research design implications for future researchers investigating the impact of shortened CEO career horizons on investment myopia.

Keywords: Horizon; problem; R&; D; spending; Empirical; design (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:17:y:2011:i:3:p:584-594

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