CEO-employee pay gap and firm R&amp;D efficiency

Chan, H. Leon; Kawada, Brett S.; Shin, Taekjin; Wang, Jeff

doi:10.1108/raf-10-2018-0207

Cited by 17 publications

(9 citation statements)

References 60 publications

(57 reference statements)

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“…Top managers play a crucial role in setting the firm's strategic plan, R&D agenda and capital investment (Chan et al, 2020). More specifically, the CEO is the central decisionmaker and has the greatest power to make critical investment and resource allocation decisions (Barker and Mueller, 2002).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

CEO power and R&D investment

Naaman

Sun

2021

ARJ

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Purpose This study aims to examine whether and how the power of a chief executive officer (CEO) relates to firm-level research and development (R&D) investment. Design/methodology/approach The authors use clustered standard errors ordinary least squares regression using a large sample of US firms from 1994 to 2017. Findings The authors find a significant negative relation between CEO power and R&D investment, suggesting that firms with more powerful CEOs are less likely to invest in R&D activities. Besides, the study finds that this significant negative relation is largely driven by firms with weaker corporate governance. Originality/value This study contributes to the finance literature on the impact and consequences of having powerful CEOs and the financial accounting literature on the determinants of R&D expenditures.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

CEO power and R&D investment

Naaman

Sun

2021

ARJ

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“…The greater the power of the GM, the lower the probability of the VP being promoted to GM, which means that the opportunity cost of the VP leaving the company is lower, thus increasing the possibility of the VP seeking another job. On the other hand, a large vertical pay dispersion will not only reduce cohesion within the executive team (Guo et al , 2020) and reduce members’ motivation for work (Chan et al , 2020), but will also induce destructive activities within the executive team (Ensley et al , 2007) and even induce turnover tendencies (Xiong et al , 2018). In addition, Chinese culture emphasizes overall interpersonal harmony and a low gap between the rich and the poor and has a long-standing cultural tradition of “inequality rather than want is the cause of trouble.” Therefore, in the Chinese context, VPs are more sensitive to large pay gaps and are more likely to take actions such as reducing work commitment, undermining teamwork or even leaving voluntarily to alleviate feelings of unfairness and exploitation.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Too much of a good thing: the non-linear effect of vertical pay dispersion on vice presidents’ voluntary turnover rate

Xiong

Chen

Zhong

2021

CMS

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Purpose While the effect of vertical pay dispersion on the voluntary turnover rate of vice presidents (VPs) has received attention, the existing research conclusions are still divided. Therefore, this study aims to explore the relationship between vertical pay dispersion and voluntary turnover rate of VPs in a Chinese context using data from listed firms. Design/methodology/approach Integrating tournament theory and social comparison theory, this study examines the non-linear effect of vertical pay dispersion on VPs’ voluntary turnover rates using empirical data from Chinese A-share listed firms from 2007 to 2016. Findings The results reveal a U-shaped relationship between vertical pay dispersion and the voluntary turnover rate of VPs. After further incorporating the moderating effect of the board governance structure, the effect is found to be enhanced in firms with more efficient board governance (i.e. smaller board size, higher board turnover and higher proportion of outside directors). Further analysis indicates that the aforementioned conclusions mainly exist in non-state-owned enterprises rather than state-owned enterprises. Originality/value The findings deepen the understanding of the costs and benefits associated with vertical pay dispersion, enrich the research findings on pay dispersion and contribute to the integration of previously inconsistent findings.

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“…As such, RQ is the counterpart at the firm level of the most common method used by economists to estimate returns to R&D at the industry level (Hall et al , 2010; Knott and Vieregger, 2020). This distinctive measure of innovation efficiency, RQ, has gained traction in the literature lately (Knott, 2008; Cooper et al , 2015; Cremers et al , 2017; Harris et al , 2019; Chan et al , 2020; Hasan et al , 2020; Vairawan and Zhang, 2020; Iyer et al , 2020).…”

Section: Introductionmentioning

confidence: 99%

“…Future research on innovation should make use of this new measure. This novel metric for innovation efficiency has been rapidly adopted in the recent literature (Cremers et al , 2017; Harris et al , 2019; Chan et al , 2020; Hasan et al , 2020; Vairawan and Zhang, 2020; Iyer et al , 2020).…”

Section: Introductionmentioning

confidence: 99%

Estimating the effect of board independence on innovation efficiency using research quotient: a quasi-natural experiment

Chatjuthamard

Treepongkaruna

Jiraporn

et al. 2023

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Purpose Exploiting a novel measure of innovation, the authors investigate whether independent directors improve innovation efficiency. This novel measure of innovation captures the extent to which the firm generates revenue from its research & development and is, therefore, more economically meaningful. The authors also use a text-based measure of innovation. Design/methodology/approach The authors rely on a quasi-natural experiment based on the passage of the Sarbanes-Oxley Act of 2002 that compelled certain firms to raise board independence. The difference-in-difference analysis is far less vulnerable to endogeneity and is more likely to show a causal influence, rather than a mere association. Findings The results show that more independent directors improve innovation efficiency significantly. Specifically, firms forced to raise board independence experienced a much higher increase in innovation than those not required to change their board composition. The authors also explore another novel measure of innovation, a text-based metric of innovation. Originality/value The research is original in several ways. First, the authors take advantage of an exogenous regulatory shock as a quasi-natural experiment. This approach is far less susceptible to endogeneity. Second, the authors use a novel measure of innovation efficiency, i.e. research quotient, which is more economically meaningful. Finally, the authors use a unique measure of innovation derived from powerful textual analysis.

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CEO-employee pay gap and firm R&D efficiency

Cited by 17 publications

References 60 publications

CEO power and R&D investment

CEO power and R&D investment

Too much of a good thing: the non-linear effect of vertical pay dispersion on vice presidents’ voluntary turnover rate

Estimating the effect of board independence on innovation efficiency using research quotient: a quasi-natural experiment

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