CEO Career Horizon and R&D Investments: Evidence from China

47 Pages Posted: 23 Jan 2019 Last revised: 29 Mar 2019

See all articles by Yaoqin LI

Yaoqin LI

Chongqing University, School of Economics and Business Admininstration

Yushu Zhu

University of Queensland - Business School

Date Written: March 25, 2019

Abstract

We investigate whether the short-termism problem of CEOs has implications on corporate investment decisions in R&D. Using a sample of Chinese public companies from 2010-2016, we find that CEOs with shorter career horizon invest less in R&D than those with longer expected career horizons. We also find that the decrease of R&D induced by short horizon is more salient for firms in industries with lower-level of environmental dynamism. Results on further tests suggest that CEO’s career horizon influence R&D mainly from the risk-averse channel rather than the agency conflict channel. These findings indicate that the uncertainty of not being paid off in short career length may inhibit firms’ long-term oriented decisions.

Keywords: CEO career horizon, R&D investment, environmental dynamism, agency conflict, rational risk-averse

Suggested Citation

Li, Yaoqin and Zhu, Yushu, CEO Career Horizon and R&D Investments: Evidence from China (March 25, 2019). 2019 Financial Markets & Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=3319187

Yaoqin Li (Contact Author)

Chongqing University, School of Economics and Business Admininstration ( email )

Shazheng St 174, Shapingba District
Chongqing, Chongqing 400030
China
0421 722 567 (Phone)

Yushu Zhu

University of Queensland - Business School ( email )

Blair Drive
Brisbane
Australia

HOME PAGE: http://https://www.business.uq.edu.au/staff/yushu-elizabeth-zhu

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