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The impact of research and development on relative performance evaluation in the UK
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Liu, Lisa Shifei (2008) The impact of research and development on relative performance evaluation in the UK. International Journal of Managerial Finance, Vol.4 (No.4). pp. 278-294. doi:10.1108/17439130810902796 ISSN 1743-9132.
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Official URL: http://dx.doi.org/10.1108/17439130810902796
Abstract
Purpose – The purpose of this paper is to investigate whether R&D spending influences the association between the cash compensation of boards of directors and relative performance evaluation (hereafter RPE). Design/methodology/approach
Design/methodology/approach – The empirical modelling of directors' compensation focuses on the multiperiod compensation approach suggested by Lambert, Lambert and Larcker and Janairaman, Lambert, and Larcker. A panel sample of 586 UK non-financial public listed firms for the period 1990 to 1998 is employed to test for the existence of RPE in both R&D intensive and non/low R&D firms.
Findings – The main results suggest that implicit RPE is used to determine directors' cash compensation before the institutional influences and self-regulation are likely to have taken effect. We find that the association between the cash compensation of directors and accounting measures of relative performance is lower in R&D intensive firms compared to firms with non/low R&D. It is possible that R&D intensive firms do not use accounting-related RPE at all. In comparison, a statistically significant relationship indicates that non/low R&D firms do use accounting-based RPE. The results also show that, in both intensive and non/low R&D firms, cash compensation is negatively related to own firm stock returns and industry average stock returns.
Originality/value – This paper contributes to the limited RPE found in the existing UK compensation literature by establishing the implicit use of accounting-based RPE for non/low R&D firms in the UK.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HJ Public Finance | ||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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Journal or Publication Title: | International Journal of Managerial Finance | ||||
Publisher: | Emerald Group Publishing Ltd. | ||||
ISSN: | 1743-9132 | ||||
Official Date: | 2008 | ||||
Dates: |
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Volume: | Vol.4 | ||||
Number: | No.4 | ||||
Number of Pages: | 17 | ||||
Page Range: | pp. 278-294 | ||||
DOI: | 10.1108/17439130810902796 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
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