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Generalist vs. Specialist CEOs: R&D Investment Sensitivity to Stock Price

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  • Jeon, Heung-Jae
  • Jung, Sumi

Abstract

We investigate the propensity of chief executive officers (CEOs) with general abilities, as opposed to specialized abilities, to utilize stock market insights in their R&D investment decisions. By analyzing data from U.S. public companies from 1993 to 2022, we discover a positive relationship between the CEOs’ general managerial ability and R&D investment-price sensitivity, suggesting an increased reliance on stock price information among generalist CEOs in making investment decisions. We also find that this relationship is even more pronounced when the stock price reflects more private information and when the degree of a firm's business specificity increases. Our findings offer valuable insights into the potential channel that links generalist CEOs and firm innovation.

Suggested Citation

  • Jeon, Heung-Jae & Jung, Sumi, 2024. "Generalist vs. Specialist CEOs: R&D Investment Sensitivity to Stock Price," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001119
    DOI: 10.1016/j.frl.2024.105081
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    More about this item

    Keywords

    General human capital; Managerial learning; R&D investment; Investment-price sensitivity;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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