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Relative CEO Underpayment and CEO Behaviour Towards R&D Spending

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  • Eric A. Fong

Abstract

abstract Arguments based on labour market theory suggest that there may be CEO behavioural issues related to pay deviations from the labour market rate for CEO pay; however, few studies examine this phenomenon. This study attempts to address such behavioural issues by examining the influence of relative CEO underpayment on reductions in R&D spending, the differences in this relationship between firms in high R&D intensive versus low R&D intensive industries, and the moderating affect of ownership structure on the CEO underpayment and R&D spending relationship. Results suggest that relative CEO underpayment is associated with reductions in R&D spending in low R&D intensive industries and increases in R&D spending in high R&D intensive industries. Also, greater relative CEO underpayment leads to greater reductions in R&D spending in manager‐controlled organizations as compared to owner‐controlled organizations. This study provides evidence that pay deviations may, in fact, affect certain CEO behaviours, specifically relating to innovation.

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  • Eric A. Fong, 2010. "Relative CEO Underpayment and CEO Behaviour Towards R&D Spending," Journal of Management Studies, Wiley Blackwell, vol. 47(6), pages 1095-1122, September.
    • Handle: RePEc:bla:jomstd:v:47:y:2010:i:6:p:1095-1122
    DOI: 10.1111/j.1467-6486.2009.00861.x
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    5. Lutao Ning & Martha Prevezer & Yuandi Wang, 2014. "Top Management Turnover and Corporate Governance in China: effects on innovation performance," Working Papers 53, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    6. Muhammad Usman Yousaf & Muhammad Kashif Khurshid & Aftab Ahmed & Muhammad Zulfiqar, 2019. "Empirical investigation of relationship between research and development intensity and firm performance: The role of ownership structure and board structure," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-27, June.
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