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The Influence of Outside Directors' Stock‐Option Compensation on Firms' R&D
Author(s) -
Deutsch Yuval
Publication year - 2007
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.2007.00611.x
Subject(s) - stock options , stock (firearms) , business , executive compensation , compensation (psychology) , accounting , monetary economics , finance , corporate governance , economics , psychology , engineering , psychoanalysis , mechanical engineering
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.