CEO incentives, takeover protection and corporate innovation

Mazouz, Khelifa ORCID: https://orcid.org/0000-0001-6711-1715 and Zhao, Yang 2019. CEO incentives, takeover protection and corporate innovation. British Journal of Management 30 (2) , pp. 494-515. 10.1111/1467-8551.12330

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Abstract

This study examines the effects of CEO equity‐based compensation and anti‐takeover provisions on corporate innovation. Using a large sample of US firms over the period 1996–2014, we find that long‐term incentives have a stronger influence on innovation when combined with takeover threats. We also show that equity‐based compensation is more likely to spur innovation for small firms and firms in industries with high product market competition and innovation pressure. However, this effect is somewhat weaker in the presence of anti‐takeover provisions, suggesting that takeover protection encourages managerial shirking even when external competition is high. Finally, in addition to the existing evidence on the valuation effect of CEO equity‐based compensation, we identify innovation as an important channel through which managerial incentives can enhance firm value. Our results have potential implications for shareholders, managers and policymakers.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Additional Information:	This is an open access article under the terms of the Creative Commons Attribution‐NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
Publisher:	Wiley
ISSN:	1045-3172
Date of First Compliant Deposit:	17 September 2018
Date of Acceptance:	11 September 2018
Last Modified:	04 May 2023 07:42
URI:	https://orca.cardiff.ac.uk/id/eprint/114989

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