CEO's annual remuneration, intensity of R&amp;D investment and company's financial performance

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Science Research Management ›› 2014, Vol. 35 ›› Issue (12) : 129-136.

CEO's annual remuneration, intensity of R&D investment and company's financial performance

Liu Zhen

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Abstract

This paper studies the interactions among CEO's annual remuneration, the intensity of R&D investment and company's financial performance using simultaneous-equation models and three-stage least-squares method with the samples from Chinese A-share listed companies. The research results suggest that: (1) There is a significant positive interactive relationship between CEO's annual remuneration and the Intensity of R&D investment in Hi-Tech enterprise, while such relationship is negative in non-Hi-Tech enterprises; (2) In Hi-Tech enterprises, the intensity of R&D investment has a significantly negative effect on the company's current financial performance and has a significantly positive effect on the company's future financial performance, and vice versa, while such relationships are reversed in the non-Hi-Tech enterprises and are insignificant; (3) There is a significant positive interactive relationship between the CEO's annual remuneration and the company's financial performance in Hi-Tech enterprises. Such relationship is less significant in non-Hi-Tech enterprises. Our results not only enrich relevant researches, but also provide the theoretical support and decision-making reference in optimizing the CEO's annual remuneration, correcting under-investment in R&D and promoting sustainable profitability for Chinese Hi-Tech enterprises.

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CEO's annual remuneration / R&D intensity / financial performance / simultaneous-equation models

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Liu Zhen. CEO's annual remuneration, intensity of R&D investment and company's financial performance[J]. Science Research Management. 2014, 35(12): 129-136

References

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