Technology Spillovers and the Duration of Executive Compensation

45 Pages Posted: 18 Oct 2021

See all articles by Minjie Huang

Minjie Huang

University of Louisville - Department of Finance

Thomas R. Kubick

University of Nebraska-Lincoln

Kevin Tseng

National Taiwan University - Department of Finance; National Taiwan University - Center for Research in Econometric Theory and Applications

Date Written: June 18, 2021

Abstract

We examine the effect of technology spillovers on the duration of executive compensation contracts. We find that in the presence of greater technology spillovers, firms tend to grant longer duration compensation contracts to their executives. This finding is consistent with theoretical predictions by Manso (2011) who argues that firms should choose longer-term contracts to encourage managerial incentives for exploration. We enhance our identification by using exogenous variation in state-level R&D tax credits of peer firms to identify the effect of technology spillovers on the duration of focal firm compensation structures. We also find this effect to be stronger among younger firms and firms with more growth opportunities. Overall, our findings suggest that technology spillover has a meaningful influence on compensation contracting.

Keywords: technology spillover, exploration vs. exploitation, pay duration, incentive contracting

JEL Classification: G3, J33, O32, O33

Suggested Citation

Huang, Minjie and Kubick, Thomas R. and Tseng, Kevin, Technology Spillovers and the Duration of Executive Compensation (June 18, 2021). Journal of Banking and Finance, 2021, Vol. 131, No. 106209, Available at SSRN: https://ssrn.com/abstract=3942316

Minjie Huang (Contact Author)

University of Louisville - Department of Finance ( email )

College of Business
Harry Frazier Hall
Louisville, KY 40292
United States

Thomas R. Kubick

University of Nebraska-Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Kevin Tseng

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

National Taiwan University - Center for Research in Econometric Theory and Applications ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

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