Management Compensation And Project Life

Harter, Charles; Harikumar, T.

doi:10.19030/jabr.v20i4.2225

Cited by 3 publications

(2 citation statements)

References 17 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Porter (1992) argues that the uncertain nature of R&D investment may encourage managers to under invest in R&D to the detriment of shareholders. It has been shown that managers adjust R&D spending in response to meet current-period earnings performance (Baber et al, 1991;Perry and Grinaker, 1994;Bange and De Bondt, 1998;Bushee, 1998;Cheng, 2004), to exceed analysts' earnings forecasts (Bhojraj et al, 2009), and to meet earnings-based compensation (Bange and De Bondt, 1998;Harter and Harikumar, 2004).…”

Section: Introductionmentioning

confidence: 99%

R D expenditures and earnings targets: evidence from France

Guidara¹

2015

Pressacademia

View full text Add to dashboard Cite

Research and development (R&D) investments reduce current-period earnings while the benefits associated with the investments occur in the future. This problem implies an earnings management tool to boost short-term performance. While there is much evidence regarding managerial discretion through R&D capitalization, empirical studies that directly examine managerial discretion through R&D expenditure adjusting have not been widely provided in the European context. This paper seeks to determine if earnings targets influence R&D investment by encouraging R&D cuts after IFRS adoption. Focusing on a French setting, where companies invest heavily in R&D, results show that managers tend to cut the R&D expenditures in order to achieve earnings target. Studying two earnings management incentives: avoidance of losses (positive earnings target) and earnings decreases (positive earning growths target), findings support thresholds assumption and provide evidence on real earnings management through R&D expensing. This empirical research contributes to the literature by providing further evidence that post-FRS, R&D cut is a strategic decision influenced by earnings management to boost performance.

show abstract

Section: Introductionmentioning

confidence: 99%

R D expenditures and earnings targets: evidence from France

Guidara¹

2015

Pressacademia

View full text Add to dashboard Cite

show abstract

“…Therefore, the nature of R&D investment and its returns may lead to the agency problem of a less than optimal investment in R&D (Porter, 1992). There is evidence that managers intentionally underinvest in R&D to meet an earnings target (Graham, Harvey, & Rajgopal, 2005), to facilitate a pending stock issuance (Bhojraj & Libby, 2005), to meet earnings-based compensation goals (Harter & Harikumar, 2004), and to beat analysts' earnings forecasts (Bhojraj, Hribar, Picconi, & McInnis, 2009). …”

Section: Introductionmentioning

confidence: 99%

Institutional Investors, R&D Policy and Firm Stock Liquidity

Scott¹

2014

IJEF

View full text Add to dashboard Cite

This paper seeks to determine if institutional investors influence corporate research and development (R&D) investment policies. Specifically, this study tests whether institutional investors encourage R&D investment in firms with higher firm stock liquidity. Firm and year fixed effect regressions examining the effect of changes in institutional investor levels to subsequent changes in R&D investment levels are used. For robustness, difference-GMM regressions and regressions for different time periods are ran on the same relationship. I find that increased institutional ownership leads to increases in R&D investment, especially in firms with higher firm stock liquidity. Results support the assertion that the presence of institutional shareholders encourages management to invest in R&D for long-term benefits in lieu of short-term profits. Institutions have become the foremost power in U.S. stock ownership. The results in this paper indicate that institutional investors can deter management from investing in R&D at a sub-optimal level, thus benefiting all shareholders.

show abstract

Do Institutional Investors Influence R&D Investment Policy in Firms with High Information Asymmetry?

Scott¹

2014

IBR

View full text Add to dashboard Cite

This paper seeks to determine if institutional investors influence corporate research and development (R&D) investment policies by encouraging R&D investment in firms with high information asymmetry. The effect of changes in institutional investor levels to subsequent changes in R&D investment levels are examined using firm and year fixed effect regressions and difference-GMM regressions. Increased institutional ownership leads to increased R&D investment and this relationship is stronger in firms with higher information asymmetry. Institutional investors encourage higher R&D investment primarily in firms with high information asymmetry indicating they have an advantage in discerning the value of R&D investments in such firms. Institutions are an important and increasing force in U.S. stock ownership. The results in this paper indicate that institutional investors have an advantage in discerning the value of R&D investments in firms with high information asymmetry. The presence of institutional investors encourages the management of such firms to make long-term investments in R&D.

show abstract

Management Compensation And Project Life

Cited by 3 publications

References 17 publications

R D expenditures and earnings targets: evidence from France

R D expenditures and earnings targets: evidence from France

Institutional Investors, R&D Policy and Firm Stock Liquidity

Do Institutional Investors Influence R&D Investment Policy in Firms with High Information Asymmetry?

Contact Info

Product

Resources

About