![Sample our Economics, Finance,Business & Industry journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5931/TOC-Subject-Sample-2021-Economics-Finance-Business-Industry.jpg"})
Abstract
Although relevant literature has been accumulated, how earnings pressure from stock analysts affects a firm's innovation expenditures remains unclear. In order to make this relationship more clear, this study investigates the impact of earnings pressure on a firm's research and development (R&D) investment by considering the combined effects of CEOs’ decision horizon and incentives. Our hypotheses were tested by firms from the S&P 1500 during the period from 2000 to 2012. The findings reveal that earnings pressure has a detrimental effect on a firm's R&D investment, and also that it goes worse when CEOs have a shorter decision horizon. However, when it comes to compensation incentives, we found that either CEOs equipped with higher stock ownership or fewer stock options can reduce the adverse effect of a shorter decision horizon on the relationship between earnings pressure and R&D retrenchment.