CEO decision-making horizon and R&D investments. Evidence from Russia

A. Stepanova and Dmitry Podukhovich
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A. Stepanova: Faculty of Economic Sciences, School of Finance, HSE University, Moscow, Russia

Journal of the New Economic Association, 2023, vol. 59, issue 2, 85-118

Abstract: Current paper raises the question of short-term decision horizon problem of a CEO and its influence on company's future investments. We investigate the presence of such a problem on the Russian market on which this kind of problem seems to be more pronounced. In this paper, on a sample of 76 Russian companies from 2013 to 2019, we examine how CEO's short-term investment horizon affects R&D in Russia. Firstly, we confirmed the existence of a positive relationship between the decision horizon and investment in R&D in the Russian market. In other words, the personal short termism of top managers significantly reduces company's investments in R&D. Secondly, we showed that performance pressure on companies from the industry reduces the length of the CEO's decision horizon. Moreover, if we shorten observation period and take pre-pandemic years 2016-2019, the influence of the CEO horizon on investment in R&D becomes stronger. The results of our research may have practical application in determining incentive contracts and bonus payments to top managers.

Keywords: CEO decision horizon; R&D investments; CEO risk taking; CEO short-term; performance pressure (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 G40 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2023:i:59:p:85-118

DOI: 10.31737/22212264_2023_2_85-118

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