{"title":"Has R&D investment become riskier for CEOs after the Sarbanes Oxley Act?","authors":"SeungWon Lee","doi":"10.1002/jcaf.22698","DOIUrl":null,"url":null,"abstract":"<p>This study explores the link between R&D investment variability and CEO turnover across the eras surrounding the Sarbanes-Oxley Act (SOX). It posits that, after SOX, R&D expenditure hikes not matched by sales growth may trigger more frequent CEO turnover, driven by a perceived increase in risk. Data from 1996 to 2010 reveal that, before SOX, R&D increases positively correlate with CEO job stability. In contrast, after SOX, a rise in R&D spending is linked to a higher rate of CEO turnover, particularly involuntary dismissals. The study further identifies that post-SOX, the negative impact of R&D spikes on CEO turnover is significantly mitigated when such investment aligns with sales growth. The findings suggest a significant influence of R&D investments on CEO turnover, underscoring the need for boards to deliberate the consequences of R&D spending and CEO turnover to better align shareholders and CEO interests.</p>","PeriodicalId":44561,"journal":{"name":"Journal of Corporate Accounting and Finance","volume":"35 3","pages":"350-363"},"PeriodicalIF":0.9000,"publicationDate":"2024-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/jcaf.22698","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Corporate Accounting and Finance","FirstCategoryId":"1085","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/jcaf.22698","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This study explores the link between R&D investment variability and CEO turnover across the eras surrounding the Sarbanes-Oxley Act (SOX). It posits that, after SOX, R&D expenditure hikes not matched by sales growth may trigger more frequent CEO turnover, driven by a perceived increase in risk. Data from 1996 to 2010 reveal that, before SOX, R&D increases positively correlate with CEO job stability. In contrast, after SOX, a rise in R&D spending is linked to a higher rate of CEO turnover, particularly involuntary dismissals. The study further identifies that post-SOX, the negative impact of R&D spikes on CEO turnover is significantly mitigated when such investment aligns with sales growth. The findings suggest a significant influence of R&D investments on CEO turnover, underscoring the need for boards to deliberate the consequences of R&D spending and CEO turnover to better align shareholders and CEO interests.
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