Family ownership as a moderator between R&D investments and CEO compensation

Shou-Min Tsao, Che-Hung Lin and Vincent Y.S. Chen

Journal of Business Research, 2015, vol. 68, issue 3, 599-606

Abstract: Firms can curb opportunistic managerial R&D investing behavior by increasing the sensitivity of CEO compensation to R&D investment. Using a sample of firms in Taiwan's R&D-intensive industries, this study examines whether family ownership moderates the sensitivity of CEO compensation to R&D investment. The results show that the sensitivity of CEO compensation to R&D investment is higher for family firms than for nonfamily firms, and that CEO compensation in family firms is based more heavily on the firm's level of R&D investment than on performance. In addition, R&D investment by family firms leads to greater investment efficiency, firm value, and growth rates than similar investment by nonfamily firms. These findings suggest that, in family firms, a compensation structure based on R&D investment enhances firm value.

Keywords: CEO compensation; Family firms; R&D investment; Investment efficiency; Myopic R&D investment behavior (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:68:y:2015:i:3:p:599-606

DOI: 10.1016/j.jbusres.2014.09.001

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