Earnings pressure and R&D cut: the moderating effects of family control and debt. Issue 4 (24th October 2020)

• Record Type: Journal Article
• Authors: Le, Quang-Anh; Lee, Cheng-Yu
• Is Part Of: Management research review. Volume 44:Issue 4(2021)
• Page Start: 568
• Page End: 587
• Publication Date: 2020-10-24
• Subjects: Earnings pressure -- Debt -- Family control -- R&D cut; Management -- Periodicals; Management -- Research -- Periodicals; 658.4
• DOI: 10.1108/MRR-01-2020-0042
• Languages: English
• ISSNs: 2040-8269

Abstract

Abstract : Purpose: This study aims to analyze the link between earnings pressure and R&D cut as well as the moderating effects of family control and debt. Design/methodology/approach: In total, 6, 130 firm-year observations of Taiwanese-listed firms were used to test the hypotheses by using a panel data regression with fixed effects estimation. Findings: The study reveals that earnings pressure is positively related to R&D cut, and this relationship can be softened when having the presence of family control and debt. Research limitations/implications: This study is conducted based on some conditions: data collection comes from a single source, earnings pressure mainly comes from analysts, R&D intensity is significant among industries, debt is a given condition to managers. Future studies, thus, are suggested to use other approaches to have further information and extend the knowledge without these conditions. Practical implications: Under the pressure of meeting analyst forecast, managers have more opportunities to flourish their priority on improving temporary profits rather than implementing R&D investments with costly budget but unpredictable outcomes. In addition to responding to the positive effect of earnings pressure on trimming long-term corporate investments, this study also found some corporate governance mechanisms to soften the managerial short-termism behavior. Originality/value: The findings partially contribute to broadening the existing knowledge base on the impact of earnings pressure on corporate activities and how some mechanisms serve as moderators.