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The Influence of Outside Directors' Stock‐Option Compensation on Firms' R&D

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  • Yuval Deutsch

Abstract

Using a sample of S&P 1500 firms between 1997 and 2000, this paper examines the effects of outside directors' stock‐option compensation on firms' R&D intensity. Results suggest that including stock options in outside directors' compensation enhances firms' R&D. Moreover, stock‐option compensation moderates the relationship between board composition and R&D intensity. These results suggest that outside directors' compensation schemes do matter. The results also highlight the need to re‐evaluate previous findings that addressed the effects of board composition on both firms' performance and strategic decisions.

Suggested Citation

  • Yuval Deutsch, 2007. "The Influence of Outside Directors' Stock‐Option Compensation on Firms' R&D," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(5), pages 816-827, September.
    • Handle: RePEc:bla:corgov:v:15:y:2007:i:5:p:816-827
    DOI: 10.1111/j.1467-8683.2007.00611.x
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    Cited by:

    1. Broye, Géraldine & François, Abel & Moulin, Yves, 2017. "The cost of CEO duality: Evidence from French leadership compensation," European Management Journal, Elsevier, vol. 35(3), pages 336-350.
    2. Elizabeth N. K. Lim & Brian T. McCann, 2014. "Performance Feedback and Firm Risk Taking: The Moderating Effects of CEO and Outside Director Stock Options," Organization Science, INFORMS, vol. 25(1), pages 262-282, February.
    3. Lampert, Curba Morris & Kim, Minyoung, 2019. "Going far to go further: Offshoring, exploration, and R&D performance," Journal of Business Research, Elsevier, vol. 103(C), pages 376-386.
    4. Pattarin Adithipyangkul & Tak Yan Leung, 2016. "Large Shareholders and Independent Director Equity Compensation," Australian Accounting Review, CPA Australia, vol. 26(2), pages 208-221, June.
    5. Elizabeth N. K. Lim, 2015. "The role of reference point in CEO restricted stock and its impact on R&D intensity in high-technology firms," Strategic Management Journal, Wiley Blackwell, vol. 36(6), pages 872-889, June.
    6. Zona, Fabio, 2016. "Agency models in different stages of CEO tenure: The effects of stock options and board independence on R&D investment," Research Policy, Elsevier, vol. 45(2), pages 560-575.
    7. Guillaume Dumas & Alexandre Di Giacomo & Quentin Arnaud, 2021. "Stock-options: an efficient tool to fight R&D managerial short-termism ? [L’attribution de stock-options : un outil efficace de lutte contre le court-termisme managérial en matière de R&D ?]," Post-Print hal-03948379, HAL.
    8. Zhang, Tianyu, 2022. "Independent directors and patenting strategies: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 81(C).
    9. Christopher Kurzhals & Lorenz Graf‐Vlachy & Andreas König, 2020. "Strategic leadership and technological innovation: A comprehensive review and research agenda," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 437-464, November.
    10. Wan, Wei & Zhou, Fanqi & Liu, Lingjie & Fang, Libing & Chen, Xudong, 2021. "Ownership structure and R&D: The role of regional governance environment," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 45-58.
    11. Ang, Siah Hwee & Benischke, Mirko H. & Hooi, Andrea Wai-Leng, 2018. "Frequency of international expansion through high control market expansion modes and interlocked directorships," Journal of World Business, Elsevier, vol. 53(4), pages 493-503.

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