The Interrelationships Between Information Technology Spending, CEO Equity Incentives and Firm Value

42 Pages Posted: 15 Aug 2009 Last revised: 26 Jul 2014

See all articles by Adi Masli

Adi Masli

University of Arkansas - Sam M. Walton College of Business

Vernon J. Richardson

University of Arkansas at Fayetteville

Juan Manuel Sanchez

University of Texas at San Antonio

Rod Smith

Cal State University Long Beach

Date Written: February 2014

Abstract

We examine the interrelationships between information technology spending, CEO equity compensation incentives and firm value. We present two related pieces of evidence. First, we find that CEO equity incentives are associated with IT spending suggesting that CEOs with higher incentives are more likely to invest in a risky asset such as IT. Second, we find that the association between IT spending and business value is stronger for firms that grant CEOs higher equity incentives. Our study contributes to the CEO compensation and IT governance literatures.

Keywords: IT Investments, CEO Compensation, Shielding, IT Value

JEL Classification: M41

Suggested Citation

Masli, Adi and Richardson, Vernon J. and Sanchez, Juan Manuel and Smith, Rodney E., The Interrelationships Between Information Technology Spending, CEO Equity Incentives and Firm Value (February 2014). Journal of Information Systems, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1448919 or http://dx.doi.org/10.2139/ssrn.1448919

Adi Masli

University of Arkansas - Sam M. Walton College of Business ( email )

Fayetteville, AR 72701
United States

Vernon J. Richardson

University of Arkansas at Fayetteville ( email )

401 WCOB
Fayetteville, AR 72701
United States

Juan Manuel Sanchez (Contact Author)

University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States

Rodney E. Smith

Cal State University Long Beach ( email )

Long Beach, CA 90840
United States
562-985-5421 (Phone)

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