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Measuring R&D curtailment among short-horizon CEOs

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  • Cazier, Richard A.

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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  • Cazier, Richard A., 2011. "Measuring R&D curtailment among short-horizon CEOs," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 584-594, June.
    • Handle: RePEc:eee:corfin:v:17:y:2011:i:3:p:584-594
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    7. Peter-Jan Engelen & Marc van Essen, 2013. "Effects of firm-level corporate governance and country-level economic governance institutions on R&D curtailment during crisis times," Chapters, in: Mehmet Ugur (ed.), Governance, Regulation and Innovation, chapter 3, pages 58-85, Edward Elgar Publishing.
    8. Ciaran Driver & Maria João Coelho Guedes, 2017. "R&D and CEO departure date: do financial incentives make CEOs more opportunistic?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(5), pages 801-820.
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