Impact of CEO pensions on value relevance of R&D expenditures

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Since CEO pension is unsecured and unfunded liabilities of the firm, it induces CEOs to have long-term incentives towards minimizing their firms’ default risk. Motivated by the unique characteristics of CEO pension, this study investigates the impact of CEO pension on the value relevance of R&D expenditures. Using Tobin’s Q ratio to measure firm value, the empirical results show that CEO pension intensifies the relation between R&D expenditures and Tobin’s Q ratio. The results remain robust in two-stage least square and propensity score matching regression analysis to address the endogeneity issues in the relation between CEO pension and the value relevance of R&D expenditures. In addition, the regression results with ROA and F-score as the alternative dependent variables also confirm that CEO pension intensifies the relation between R&D expenditures and firm value.

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    • Table 1. Summary statistics
    • Table 2. Correlations
    • Table 3. Regression of Tobin’s (1969) Q ratio on R&D expenditures and CEO pensions
    • Table 4. Addressing endogeneity
    • Table 5. Robustness test
    • Table 6. CEO turnover
    • Table 7. CEO gender