Research Article

The Effect of CEO and Management Compensation Sensitivity on R&D costs

Nam Hosung, Hong Cheol Kyu

Chung-Ang University
Chung-Ang University

Published: January 2022 · Vol. 51, No. 3 · pp. 811-842

DOI: https://doi.org/10.17287/kmr.2022.51.3.811

Abstract

This study examines the effects of CEO(or Management) compensation sensitivity on R&D costs. Traditionally, R&D costs is used for earnings management. In previous studies, the main factors for R&D costs are analyzed as firm characteristics and industry characteristics. However, since the CEO decides R&D costs at CEO discretion, the key factor in the R&D costs factor is the CEO's motivation. Therefore, this study examines the effect of CEO's compensation sensitivity on R&D costs. As a result of the empirical analysis of this study, CEO's show differences according to the method of R&D costs according to the compensation structure. This directly shows that CEO's actively use R&D costs for their own private interest. This study empirically analyzed that the method of R&D costs differs according to the management compensation structure.

Keywords: R&D costsCEO Compensation Sensitivityfirm valueAgency theory

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Publication History

Published 2022-01-01

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