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Measuring R&D curtailment among short-horizon CEOs

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  • Cazier, Richard A.
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    Abstract

    I review evidence produced by prior literature on CEO horizon problems and show that prior empirical findings are correlated with the research design employed. I find that evidence of R&D curtailment by CEOs as they approach retirement stems predominantly from cross-sectional correlations between CEO age or tenure and R&D spending. Using a broad sample of CEOs of S&P 1500 firms, I identify two factors that confound the cross-sectional relationship of firm R&D spending on CEO age or tenure which can lead to spurious inferences regarding the CEO horizon problem. I find that tracking R&D spending by the same CEOs over time produces no evidence of R&D curtailment. These results have research design implications for future researchers investigating the impact of shortened CEO career horizons on investment myopia.

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    File URL: http://www.sciencedirect.com/science/article/B6VFK-529CNJ9-1/2/c45fcfa98e3dcc57efeeed481f559100
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 17 (2011)
    Issue (Month): 3 (June)
    Pages: 584-594

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    Handle: RePEc:eee:corfin:v:17:y:2011:i:3:p:584-594

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    Web page: http://www.elsevier.com/locate/jcorpfin

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    Keywords: Horizon problem R& D spending Empirical design;

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