Market value of R&D, patents, and CEO characteristics

36 Pages Posted: 29 Nov 2023 Last revised: 12 Aug 2024

See all articles by Lipeng Wang

Lipeng Wang

Zhejiang University - School of Management

Thanos Verousis

Vlerick Business School

Mengyu Zhang

University of Sheffield

Date Written: November 5, 2023

Abstract

The contribution of knowledge capital to firm value has increased significantly, from 25% in the 1970s to 45% in the 2010s (Belo et al. 2022). However, what influences firms' ability to maximize the effect of knowledge capital on firm value? Drawing on insights from upper echelons, agency, and behavioral agency theories, we show that CEO characteristics are crucial in enabling firms to take advantage of knowledge stock. We empirically demonstrate that short-term CEO compensation structures are detrimental to a firm's ability to take advantage of its knowledge stock. We further show that CEO power enhances knowledge stock and R&D intensity. Our study provides direct empirical evidence of the importance of CEO compensation structure and corporate governance in understanding firm value in a knowledge economy.

Keywords: Innovation, Patent, Market value, CEO power, CEO compensation JEL classifications: G10, O31, O32

JEL Classification: G10, O31, O32

Suggested Citation

Wang, Lipeng and Verousis, Thanos and Zhang, Mengyu, Market value of R&D, patents, and CEO characteristics (November 5, 2023). Available at SSRN: https://ssrn.com/abstract=4623936 or http://dx.doi.org/10.2139/ssrn.4623936

Lipeng Wang

Zhejiang University - School of Management ( email )

Hangzhou, Zhejiang Province 310058
China

Thanos Verousis (Contact Author)

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

Mengyu Zhang

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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