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Family ownership as a moderator between R&D investments and CEO compensation

Author

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  • Tsao, Shou-Min
  • Lin, Che-Hung
  • Chen, Vincent Y.S.

Abstract

Firms can curb opportunistic managerial R&D investing behavior by increasing the sensitivity of CEO compensation to R&D investment. Using a sample of firms in Taiwan's R&D-intensive industries, this study examines whether family ownership moderates the sensitivity of CEO compensation to R&D investment. The results show that the sensitivity of CEO compensation to R&D investment is higher for family firms than for nonfamily firms, and that CEO compensation in family firms is based more heavily on the firm's level of R&D investment than on performance. In addition, R&D investment by family firms leads to greater investment efficiency, firm value, and growth rates than similar investment by nonfamily firms. These findings suggest that, in family firms, a compensation structure based on R&D investment enhances firm value.

Suggested Citation

  • Tsao, Shou-Min & Lin, Che-Hung & Chen, Vincent Y.S., 2015. "Family ownership as a moderator between R&D investments and CEO compensation," Journal of Business Research, Elsevier, vol. 68(3), pages 599-606.
    • Handle: RePEc:eee:jbrese:v:68:y:2015:i:3:p:599-606
    DOI: 10.1016/j.jbusres.2014.09.001
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    8. AlHares, Aws & Ntim, Collins & King, David, 2018. "Block Ownership and Companies' R&D Intensity: The Moderating Effect Of Culture," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 15(2), pages 19-32.
    9. Röd, Irina, 2016. "Disentangling the family firm’s innovation process: A systematic review," Journal of Family Business Strategy, Elsevier, vol. 7(3), pages 185-201.
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