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

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

Research output: Contribution to journalArticlepeer-review

33 Scopus citations

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.

Original languageEnglish
Pages (from-to)599-606
Number of pages8
JournalJournal of Business Research
Volume68
Issue number3
DOIs
StatePublished - 1 Mar 2015

Keywords

  • CEO compensation
  • Family firms
  • Investment efficiency
  • Myopic R&D investment behavior
  • R&D investment

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