CEO power and R&D investment

Abstract

Purpose

This study aims to examine whether and how the power of a chief executive officer (CEO) relates to firm-level research and development (R&D) investment.

Design/methodology/approach

The authors use clustered standard errors ordinary least squares regression using a large sample of US firms from 1994 to 2017.

Findings

The authors find a significant negative relation between CEO power and R&D investment, suggesting that firms with more powerful CEOs are less likely to invest in R&D activities. Besides, the study finds that this significant negative relation is largely driven by firms with weaker corporate governance.

Originality/value

This study contributes to the finance literature on the impact and consequences of having powerful CEOs and the financial accounting literature on the determinants of R&D expenditures.

Citation

Naaman, C. and Sun, L. (2022), "CEO power and R&D investment", Accounting Research Journal, Vol. 35 No. 2, pp. 160-177. https://doi.org/10.1108/ARJ-07-2020-0195