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

Author

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  • Stepanova, A.

    (Faculty of Economic Sciences, School of Finance, HSE University, Moscow, Russia)

  • Podukhovich, D.

    (Faculty of Economic Sciences, Corporate Finance Center, HSE University, Moscow, Russia)

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.

Suggested Citation

  • Stepanova, A. & Podukhovich, D., 2023. "CEO decision-making horizon and R&D investments. Evidence from Russia," Journal of the New Economic Association, New Economic Association, vol. 59(2), pages 85-118.
    • Handle: RePEc:nea:journl:y:2023:i:59:p:85-118
    DOI: 10.31737/22212264_2023_2_85-118
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    More about this item

    Keywords

    CEO decision horizon; R&D investments; CEO risk taking; CEO short-term; performance pressure;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G40 - Financial Economics - - Behavioral Finance - - - General

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