Abstract

http://ssrn.com/abstract=1910134
 
 

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Research & Development Intensity and Executive Compensation


Rajiv D. Banker


Temple University - Department of Accounting

Dmitri Byzalov


Temple University - Fox School of Business and Management

Chunwei Xian


Independent

April 14, 2013


Abstract:     
We examine the relation between R&D intensity and the relative weights in CEO compensation on ability signals and financial performance measures. We argue that because CEO’s technology-related ability is more important in R&D intensive firms, the weights on relevant ability signals in CEO compensation should be increasing with R&D intensity. Because both accounting and market-based performance measures have low precision in R&D intensive firms, the weights on short-term incentives tied to current earnings and stock returns should be decreasing with R&D intensity, whereas the reliance on long-term equity incentives should be increasing with R&D intensity. We test these predictions using Compustat/CRSP/ExecuComp data from 1992 to 2006, combined with hand-collected personal data on CEO’s education and professional background. As expected, we find that R&D intensive firms have higher weights on relevant CEO ability signals, lower weights on financial performance measures, and greater reliance on long-term equity incentives.

Number of Pages in PDF File: 37

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Date posted: August 17, 2011 ; Last revised: April 19, 2014

Suggested Citation

Banker, Rajiv D. and Byzalov, Dmitri and Xian, Chunwei, Research & Development Intensity and Executive Compensation (April 14, 2013). Available at SSRN: http://ssrn.com/abstract=1910134 or http://dx.doi.org/10.2139/ssrn.1910134

Contact Information

Rajiv D. Banker
Temple University - Department of Accounting ( email )
Philadelphia, PA 19122
United States

Dmitri Byzalov
Temple University - Fox School of Business and Management ( email )
Philadelphia, PA 19122
United States
HOME PAGE: http://astro.temple.edu/~dbyzalov/

Chunwei Xian (Contact Author)
Independent ( email )
No Address Available
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