CEO Incentives, Takeover Protection and Corporate Innovation

22 Pages Posted: 11 May 2019

See all articles by Khelifa Mazouz

Khelifa Mazouz

Cardiff University

Yang Zhao

Newcastle University

Date Written: April 2019


This study examines the effects of CEO equity‐based compensation and anti‐takeover provisions on corporate innovation. Using a large sample of US firms over the period 1996–2014, we find that long‐term incentives have a stronger influence on innovation when combined with takeover threats. We also show that equity‐based compensation is more likely to spur innovation for small firms and firms in industries with high product market competition and innovation pressure. However, this effect is somewhat weaker in the presence of anti‐takeover provisions, suggesting that takeover protection encourages managerial shirking even when external competition is high. Finally, in addition to the existing evidence on the valuation effect of CEO equity‐based compensation, we identify innovation as an important channel through which managerial incentives can enhance firm value. Our results have potential implications for shareholders, managers and policymakers.

Suggested Citation

Mazouz, Khelifa and Zhao, Yang, CEO Incentives, Takeover Protection and Corporate Innovation (April 2019). British Journal of Management, Vol. 30, Issue 2, pp. 494-515, 2019, Available at SSRN: or

Khelifa Mazouz (Contact Author)

Cardiff University ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Yang Zhao

Newcastle University ( email )

5 Barrack Road
Devonshire Building
United Kingdom

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