CEO Horizon Problem and Characteristics of Board of Directors and Compensation Committee

ORCiD

Ruonan Liu: 0000-0002-1197-1780

Document Type

Article

Publication Title

Journal of Corporate Accounting and Finance

ISSN

1097-0053

Volume

31

Issue

4

DOI

10.1002/jcaf.22446

First Page

121

Last Page

134

Publication Date

4-11-2020

Abstract

Extant research finds inconclusive evidence about the CEO horizon problem. One possible explanation is that board of directors, especially compensation committees, intervene to mitigate the CEO horizon problem. In this study, we examine whether the characteristics of board of directors and compensation committee affect their effectiveness in mitigating the CEO horizon problem. We find that retiring CEOs are more likely to reduce R&D expenditures when CEOs have more power, and director tenure is longer; retiring CEOs in firms with large board of directors and compensation committee are less likely to manage accruals.

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