Ceo’s Financial Sophistication and P&D Investments

Abstract

This study analyzed the relationship between CEO’s Financial Sophistication (FS) and the investments made in Research and Development (R&D), disclosed in the profit and loss statement and intangible assets. To this end, data were collected from companies listed on B3 from 2011 to 2019 on R&D and the personal characteristics of the CEO (experiences and training) from various sources. Factor analysis methods, probit regression models, and panel data with fixed effects were used for the analyses. It was found that, of the total sample, less than 20% of companies spend on R&D. Among the economic sectors, what most invest resources in R&D is information technology. As for the CEO’s FS, the evidence found does not confirm the hypothesis of the relationship with R&D. However, the tests conducted with the academic and professional dimensions of FS pointed out that the CEO with higher levels of the professional dimension is likely to disclose R&D in the profit and loss statement. In contrast, the academic dimension of the FS has a weak negative relationship with levels of resources applied in R&D and recorded in the intangible assets.