CEO inside-debt compensation and strategic emphasis

Nithya Shankar () and Bill B. Francis ()
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Nithya Shankar: State University of New York, Plattsburgh
Bill B. Francis: Lally School of Management, Rensselaer Polytechnic Institute

Marketing Letters, 2023, vol. 34, issue 4, No 8, 653-667

Abstract: Abstract This study utilizes agency theory to examine how Chief Executive Officers’ (CEOs) compensation contracts impact marketing strategy decisions within firms. Specifically, we examine whether variations in CEOs’ inside-debt to equity ratio (i.e., ratio of pension and deferred compensation to equity holdings) impact the firm’s strategic emphasis. Our findings indicate that CEOs with large proportion of inside-debt (i) tend to refrain from value appropriation through reduced advertising investments, and (ii) strategically emphasize firm resources towards the value appropriation process (advertising) as opposed to value creation (R&D).

Keywords: Strategic emphasis; R&D; Advertising; CEO compensation; Pension and deferred compensation; Equity (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11002-023-09673-8

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