 Do co-opted boards enhance or reduce R&D productivity?Oneil Harris, Charmaine Glegg and Winston Buckley The North American Journal of Economics and Finance, 2019, vol. 50, issue C Abstract: The literature suggests that firms with more co-opted directors—those appointed after the chief executive officer (CEO) assumes office—are subject to less oversight than other firms. Chintrakarn, Jiraporn, Sakr, and Lee (2016) recently show that co-option leads to higher R&D investments and posit that managers with co-opted boards are more motivated to make long-term investments because they are less likely to be removed. Under this view, co-opted directors mitigate managerial myopia. However, since the outcomes of R&D projects are known to be stochastic, this study expands upon prior research by examining how board co-option affects R&D productivity (not just R&D spending). We find strong evidence indicating that co-opted directors enable managers to overinvest in inefficient R&D projects, thereby reducing R&D output. Our results support an agency theory view for the increases in R&D investments linked to co-opted directors rather than the decline in managerial myopia perspective. Keywords: Agency theory; Board co-option; R&D productivity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818306223 DOI: 10.1016/j.najef.2019.101005 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.