CEO's Education Level and Investments in R&D (P. Khmeleva, сетевое издание "Электронный журнал "Корпоративные финансы" Journal of Corporate Finance Research", N 1, 2023 г.)

Khmeleva P. CEO's Education Level and Investments in R&D

P. Khmeleva - PhD student, School of Finance, National Research University Higher School of Economics, Moscow, Russia

The paper evaluates the influence of a CEO's education level and their experience on the amount invested in R&D in the pharmaceutical industry. The sample consists of 270 high-tech pharmaceutical companies from the S&P BMI index in 1999-2018 from 23 countries, both developed and emerging. The pharmaceutical industry is of particular interest since the projects in this sphere require specialized education to understand and manage business processes. Therefore, the investment payback period is long. As a result, there is a high rate of intangible assets in pharmaceuticals compared to other sectors.

At the first glance, according to the results of regression analysis, a degree in business, finance, management and economics has no significant impact on investments. However, education in a specific sphere, i.e., physics, chemistry, biology, or mathematics, has a significant positive impact on R&D expenses. We can see a similar effect for CEOs with two or more degrees in different fields. These results are in line with the findings of previous studies regarding CEO's education.

At the next stage, a CEO's educational level and major are analyzed simultaneously. A degree obtained in an industry-specific field or a degree supplemented by a degree in finance or management education has a positive impact on R&D expenses, while a standalone financial degree, on the contrary, has a negative effect.

Thus, this study contributes to academic literature by introducing the concept that to get unbiased results in similar studies we should account not only for the degree, but also for the major. In the practical sphere, the results may be useful for those choosing the educational track on their career path to a CEO position, as well as for HRs, boards of directors, and other stakeholders who are making a decision on CEO turnover. Moreover, the results provide insights that could be useful for market analysts' and investors' predictive models.

Acknowledgement. The author extends her gratitude to the Research and Training Laboratory of Corporate Finance and the Higher School of Economics where this study was conducted as a part of its Fundamental Research Programme. Also, we express special gratitude to the reviewer of this paper Anastasiia Stepanova and to the professors and organizers of academic seminars who assisted in the elaboration of certain parts of this research.

Keywords: CEO, CEO's education, R&D, investments, MBA, PhD, management