Key points are not available for this paper at this time.
This study uses a sample of Korean listed firms from 2012 to 2022 to investigate whether younger CEOs respond more strongly to stock overvaluation in their corporate R&D investment decisions. The results indicate that stock overvaluation is positively correlated with R&D investment, with this relationship significantly stronger in firms led by younger CEOs. These findings remain robust across various alternative specifications and endogeneity checks. Further analyses do not provide compelling evidence that the equity financing channel primarily explains the observed relationship. Rather, the overall pattern of evidence aligns more with a catering-based interpretation. In particular, the R&D response to stock overvaluation is stronger in firms with a higher presence of short-horizon investors, implying that R&D investment may partially reflect managerial responses to stock market signals during periods of overvaluation. Overall, the findings indicate that the real effects of stock overvaluation depend on managerial interpretation. This study contributes to the literature on behavioral corporate finance and corporate innovation by highlighting the role of CEO age in shaping firms’ responses to stock overvaluation.
Jeongdae Yim (Tue,) studied this question.