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The Influence of Outside Directors' Stock-Option Compensation on Firms' R&D

Authors


*York University, Schulich School of Business, 4700 Keele Street, Toronto, Ontario, M3J1P3, Canada. Tel: +1 (416) 7362100 ext. 77895; Fax: +1 (416) 736 5762; Email: ydeutsch@schulich.yorku.ca

Abstract

Using a sample of S&P 1500 firms between 1997 and 2000, this paper examines the effects of outside directors' stock-option compensation on firms' R&D intensity. Results suggest that including stock options in outside directors' compensation enhances firms' R&D. Moreover, stock-option compensation moderates the relationship between board composition and R&D intensity. These results suggest that outside directors' compensation schemes do matter. The results also highlight the need to re-evaluate previous findings that addressed the effects of board composition on both firms' performance and strategic decisions.

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