Do Co-Opted Directors Mitigate Managerial Myopia? Evidence from R&D Investments

13 Pages Posted: 3 Apr 2016

See all articles by Pandej Chintrakarn

Pandej Chintrakarn

Mahidol University International College (MUIC)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Sameh Sakr

Arab Academy for Science and Technology

Sangmook Lee

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Date Written: March 29, 2016

Abstract

We explore the effect of co-opted directors on R&D investments. Co-opted directors are those appointed after the incumbent CEO assumes office. Because a co-opted board represents a weakened governance mechanism that diminishes the probability of executive removal, managers are less likely to be removed and are more motivated to make long-term investments. Our evidence shows that board co-option leads to significantly higher R&D investments. To draw a causal inference, we execute a quasi-natural experiment using an exogenous regulatory shock from the Sarbanes-Oxley Act (SOX). Our results reveal that the effect of board co-option on R&D is more likely causal.

Keywords: co-opted directors, co-opted board, board co-option, R&D, myopia, corporate governance

JEL Classification: G30, G34

Suggested Citation

Chintrakarn, Pandej and Jiraporn, Pornsit and Sakr, Sameh and Lee, Sangmook, Do Co-Opted Directors Mitigate Managerial Myopia? Evidence from R&D Investments (March 29, 2016). Available at SSRN: https://ssrn.com/abstract=2756172 or http://dx.doi.org/10.2139/ssrn.2756172

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand
66 (0) 2441 5090 (Phone)
66 (0) 2441 9745 (Fax)

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Sameh Sakr

Arab Academy for Science and Technology ( email )

P.O. Box 1029
Miami, Alexandria, 1029
Egypt

Sangmook Lee

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

University Park
State College, PA 16802
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
86
Abstract Views
934
rank
302,647
PlumX Metrics