The Influence of Outside Directors' Stock‐Option Compensation on Firms' R&D

Yuval Deutsch

69 citations0/0 files storedCorporate Governance An International Review

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Corporate Finance and Governance Auditing, Earnings Management, Governance Firm Innovation and Growth

Abstract

Using a sample of S&P 1500 firms between 1997 and 2000, this paper examines the effects of outside directors' stock‐option compensation on firms' R&D intensity. Results suggest that including stock options in outside directors' compensation enhances firms' R&D. Moreover, stock‐option compensation moderates the relationship between board composition and R&D intensity. These results suggest that outside directors' compensation schemes do matter. The results also highlight the need to re‐evaluate previous findings that addressed the effects of board composition on both firms' performance and strategic decisions.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1990Absorptive Capacity: A New Perspective on Learning and Innovation 1973The Pricing of Options and Corporate Liabilities 1983Separation of Ownership and Control 1997A Survey of Corporate Governance 1989Agency Theory: An Assessment and Review 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 1990Performance Pay and Top-Management Incentives

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