Ripple Effects of CEO Awards: Investigating the Acquisition Activities of Superstar CEOs' Competitors

Research summary : This study proposes that CEOs may undertake intensive acquisition activities to increase their social recognition and status after witnessing their competitors' winning CEO awards. Using a sample of U.S. S&P 1,500 firm CEOs, we find that CEOs engage in more intensive acquisition activities in the period after their competitors won CEO awards (i.e., postaward period), compared to the preaward period. Moreover, this effect is stronger when focal CEOs themselves had a high likelihood of winning CEO awards. Our findings also show that acquisitions by focal CEO firms in the postaward period realize lower announcement returns compared to acquisitions by the same CEOs in the preaward period. Managerial summary : Each year a few CEOs receive CEO awards from business media and CEOs who receive such awards become instant celebrities, that is, superstar CEOs. This study explores how superstar CEOs' competitors react to not winning CEO awards. We find that superstar CEOs' competitors undertake more intensive acquisition activities in the postaward period compared to the preaward period. This is particularly true for competitors who were close, yet did not win CEO awards. In addition, acquisitions by superstar CEOs' competitors are associated with lower announcement returns in the postaward compared to the preaward period. These findings collectively indicate that acquisitions may be used as a channel for superstar CEOs' competitors to elevate their own social status, but at a cost to shareholders. Copyright © 2017 John Wiley & Sons, Ltd.     

Using panel data dea to measure CEOs' focus of attention: An application to the study of cognitive group membership and performance

In this study, we examine the existence and performance of cognitive groups. In accordance with the attention‐based view of managerial cognition, cognitive groups are defined as groups of firms in which the CEOs focus their attention on similar strategic elements when seeking to maximize their firm's competitive advantage. We developed a panel data extension of the original Data Envelopment Analysis to gauge CEOs' focus of attention and then clustered firms into groups. We compared our approach with other approaches that use content analysis of CEOs' letters to shareholders and CEOs' demographic characteristics to measure CEOs' attention. Although the different approaches are related, indicating the existence of a common underlying construct (i.e., mental models), our approach explains a higher proportion of the variation in organizational performance. Copyright © 2014 John Wiley & Sons, Ltd.     

Labor market evaluation versus legacy conservation: What factors determine retiring CEOs' decisions about long‐term investment?

Do CEOs nearing retirement attempt to boost short‐term firm performance or do they care more about what type of legacy they will leave behind? The two opposing predictions about the behavior of CEOs upon retirement suggest that retiring CEOs' decisions about certain long‐term investment items may be more complex than suggested in the literature. In search of an answer to this question, we examine the relationship between CEO retirement and the level of firm commitment to corporate social responsibility (CSR). The results show that CEO retirement has a negative effect on firm commitment to CSR. However, we found that the negative effect becomes weaker when CEOs retire at relatively older ages or are retained on the board of directors of their own firms. Our finding suggests that CEOs who face weaker pressure from the labor market for corporate directors may pay more attention to preserving their legacy. Copyright © 2014 John Wiley & Sons, Ltd.     

The accentuated CEO career horizon problem: evidence from international acquisitions

We develop a conceptual model of the career horizon problem of CEOs approaching retirement and discuss its implications on firm risk taking, specifically in engagement in international acquisitions. Based on prospect theory and agency theory, we emphasize the legacy conservation and wealth preservation concerns of CEOs and investigate how their holdings of in‐the‐money unexercised options and firm equity accentuate or mitigate the career horizon problem. The model is tested in the context of international acquisitions with a sample of 293 U.S. firms over a five‐year period (1995–1999). We find that a longer CEO career horizon is associated with a higher likelihood of international acquisitions. We also find that CEOs nearing retirement with high levels of in‐the‐money unexercised options and equity holdings are less likely to engage in international acquisitions than CEOs with low levels of in‐the‐money options and equity holdings. The study raises important considerations about the implications of CEOs' equity and in‐the‐money option holdings on firm risk taking at various stages of their career horizon. Copyright © 2008 John Wiley & Sons, Ltd.     

Ceo selection,succession, compensation and firm performance: A theoretical integration and empirical analysis

This study seeks to extend and unify a set of research issues relating to CEO selection, succession, compensation, and firm performance. The study offers a model of these issues from a combined agency and organizational perspective, and tests the model using archival data and perceptual data from survey responses from 118 CEOs of the largest U.S. corporations. The results suggest that several CEO issues are significant predictors of variation in firm performance, supporting the paper's arguments for (1) a reinterpretation of the insiderfoutsider CEO distinction, (2) the relevance of CEO succession planning, and (3) the importance of CEOs' perceptions of the linkage between their personal wealth and firm wealth.     

Examining the effect of complexity in strategic group knowledge structures on firm performance

A developing stream of research in the strategy field explores the competitive structure of industries from the perspective of industry participants. This work has demonstrated that managers develop strategic group knowledge structures in order to make sense of their competitive environment. This study extends this line of research by examining the complexity evident in the strategic group knowledge structures developed by firms' top management teams and assessing the relationship between complexity in these knowledge structures and subsequent firm performance. Specifically, we examine the complexity of top managers' knowledge structures regarding their competition using a sample of 76 top management teams from banks in three U.S. cities. Using hierarchical regression, we find a significant relationship between the complexity of cognitive strategic groups and subsequent firm performance. These results suggest that the structure of the cognitive templates that top managers use to understand their environment and the actions of their competitor influence the degree of strategic success of their firm. Copyright © 2002 John Wiley & Sons, Ltd.     

CEOs’ Transformational Leadership and Product Innovation Performance: The Roles of Corporate Entrepreneurship and Technology Orientation

Product innovation is an important research topic that has stimulated significant interest among management scholars and practitioners. Leadership has been suggested to be a critical factor affecting product innovation. Numerous studies have documented that transformational leadership positively influences product innovation performance, which is conceptualized as the degree to which a new product and/or service has achieved its market share, sales, rates of asset return, rates of investment return, and profit objectives. However, there is a lack of studies examining the specific means through which transformational leadership influences product innovation performance at the firm level. Therefore, this study aimed to investigate the processes through which such effect is achieved and to determine whether corporate entrepreneurship and technology orientation as intervening factors influence this effect. To test the hypotheses, data were collected from 151 matched top management team (TMT) members and chief executive officers (CEOs) from Chinese manufacturing firms. Two separate questionnaires were used to collect the data. TMT members’ questionnaire included measures of CEO's transformational leadership, whereas CEOs’ questionnaire included questions about corporate entrepreneurship, technology orientation, and product innovation performance. Hierarchical linear regression was used to test the hypothesized effects. The results of the analysis provided the support for the fully mediating role of corporate entrepreneurship on the relationship between CEOs' transformational leadership and product innovation performance. In addition, technology orientation was found to significantly moderate the CEOs' transformational leadership–corporate entrepreneurship linkage. Furthermore, the mediated moderation effect of corporate entrepreneurship on the relationships among CEOs’ transformational leadership, technology orientation, and product innovation performance was significantly supported. By studying leadership among CEOs, this study contributes to the research by elucidating the mechanisms through which transformational leadership influences product innovation performance. The mediating role of corporate entrepreneurship encourages managers to improve their leadership style so as to enhance the development of corporate entrepreneurship and innovation practices. The findings also show that technology orientation provides the conditions for the smooth translation of the CEO's transformational leadership into actual entrepreneurial activities. Hence, firms should prioritize technology orientation to optimize the implementation of transformational leadership so as to emphasize innovation and new venture creation.     

Performance deviations and acquisition premiums: The impact of CEO celebrity on managerial risk‐taking

Research summary: This article draws on identity control theory and a study of acquisition premiums to explore how CEO celebrity status and financial performance relative to aspirations affect firm risk behavior. The study finds that celebrity CEOs tend to pay smaller premiums for target firms, but these tendencies change when prior firm performance deviates from the industry average returns, thereby leading these CEOs to pay higher premiums. The study also finds that the premiums tend to be even larger when celebrity CEOs have more recently attained celebrity status. Taken together, these findings contribute to identity control theory and CEO celebrity literatures by suggesting that celebrity status is a double‐edged sword and that the internalization of celebrity status by CEOs strongly influences the decision‐making of CEOs. Managerial summary: The purpose of this article is to examine how CEO celebrity status and financial performance relative to aspirations affect the size of acquisition premiums. The study finds that celebrity CEOs tend to pay smaller premiums for target firms. However, when celebrity CEOs' prior firm performance is either better or worse than the industry average, these CEOs pay higher premiums. This situation is exacerbated when the CEO has only recently been crowned a celebrity. In effect, these CEOs feel great pressure to match the inflated performance expectations that come with celebrity status. These findings suggest that being a celebrity is a double‐edged sword. The implication here is that CEOs who have recently been crowned a celebrity should be aware of these pressures and cope accordingly. Copyright © 2015 John Wiley & Sons, Ltd.     

An Attention‐Based View of Family Firm Adaptation to Discontinuous Technological Change: Exploring the Role of Family CEOs' Noneconomic Goals

Recent studies show that managerial attention is a particularly important precursor of established firms' responses to discontinuous technological change. However, little is known about the factors that shape managerial attention‐response patterns. Our qualitative study investigates how the attention of family firm chief executive officers (CEOs) to discontinuous technological shifts, the interpretation and decision‐making processes associated with these changes, and ultimately organizations' responses are affected by CEOs' noneconomic goals. Based on seven longitudinal case studies in the German consumer goods industry, the paper induces a process model that extends the findings of the literature on the attention‐based view and helps to explain heterogeneity in family firms' adaptation to discontinuous technological change. This study shows that the family CEO's specific noneconomic goals—such as power and control, transgenerational value, the maintenance of family reputation, the continuance of personal ties, or personal affect associated with the family business—determine whether the CEO assesses an emerging technology as relevant enough to warrant a reaction from the firm. Moreover, the family CEO's noneconomic goals constrain the set of considered responses. The outcome of this sensemaking process determines the organization's response. For instance, in the specific context of this study, the goal of “family power and control” entailed an immediate interpretation of the focal trend as important for maintaining influence, and resulted in an unconstrained set of responses and, ultimately, high innovation in the new domain. Over time, family CEOs might reevaluate the emerging trend based on their goals and adapt organizational moves accordingly. The paper identifies and discusses how ambiguities and dilemmas may arise during this process. Our findings contribute to the literature on adaptation to discontinuous technological change and to family firm research.     

Why do some outside successions fare better than others? The role of outside CEOs' prior experience with board diversity

Research summary: We develop a theory to explain why new outside CEOs can better manage their relationship with the board if they previously served on boards that were more diverse than the focal board. We predict that a new outside CEO's prior experience with more diverse boards not only reduces the likelihood of post‐succession CEO turnover and director turnover, but also improves firm performance. Results from an analysis of 188 outside CEOs in a sample of Fortune 500 companies provide support for our theory. This study contributes to upper echelon theory and research by identifying outside CEOs' prior experience with board diversity as an important aspect of their background that influences a range of major organizational outcomes, including CEO turnover, director turnover, and firm performance. Managerial summary: It is challenging to be a new CEO who comes from outside of the organization. Our study examines why some new outside CEOs fare better than others. We suggest that a positive relationship with the board of directors is a key factor in a new outside CEO's success. A new outside CEO can better manage the relationship with the board if he or she has prior experience working with other demographically diverse boards. In contrast, when the focal board is more diverse than the other boards on which the new CEO previously served, the new CEO tends to struggle in managing his or her relationship with the board, experiencing a higher likelihood of turnover and delivering worse financial performance. Copyright © 2015 John Wiley & Sons, Ltd.     

The differing effects of agent and founder CEOs on the firm's market expansion

This paper builds and tests the thesis that CEO influence evolves differently for founders and agents. We theorize that at the beginning of their tenures, founder CEOs can pursue market expansion more aggressively than agent CEOs, because they take office with the combination of motivation, power, and requisite knowledge that agent CEOs build over time. Subsequently, however, founder CEOs have less access to the administrative infrastructure necessary to sustain a growing firm, making them less able than agent CEOs to continue market expansion mid‐tenure and more severely constrained by market complexity. A longitudinal study of cable television operators confirms that the firm's market expansion follows an inverted U‐shape for agents and a downward slope for founders, while market complexity reduces market expansion, especially for founders. Copyright © 2011 John Wiley & Sons, Ltd.     

Shareholder perceptions of the changing impact of CEOs: Market reactions to unexpected CEO deaths, 1950–2009

Research summary : Despite a number of studies highlighting the important impact Chief Executive Officers (CEOs) have on firms, several theoretical and methodological questions cloud existing findings. This study takes an alternative approach by examining how shareholders' perceptions of CEO significance have changed over time. Using an event study methodology and a sample of 240 sudden and unexpected CEO deaths, we show that absolute (unsigned) market reactions to these events in U.S. public firms have increased markedly between 1950 and 2009. Our results indicate that shareholders act in ways consistent with the belief that CEOs have become increasingly more influential in recent decades. Managerial summary : With Chief Executive Officers (CEOs) facing increased scrutiny and receiving ever‐increasing pay packages, substantial debate exists about their overall contribution to firm outcomes. While prior research has sought to calculate the proportion of firm outcomes attributable to the CEO, this study takes an alternative approach by using the “wisdom of the crowds” to assess how shareholders think about the importance of CEOs. Our study finds that shareholders, perhaps the most financially motivated stakeholder, view CEOs as increasingly important drivers of firm outcomes, good and bad, versus their peers from decades earlier. Notably, market reaction to the unexpected death of a CEO has increased steadily over the last six decades, highlighting the importance of succession planning and supporting, at least partially, the increased compensation given today's top executives. Copyright © 2016 John Wiley & Sons, Ltd.     

Chief executive scanning emphases,environmental dynamism,and manufacturing firm performance

Chief executives must allocate their scarce time for scanning efforts among relevant domains of their firms' external environment and their firms' internal circumstances. We argue that high‐performing CEOs vary their relative scanning emphases on different domains according to the level of dynamism they perceive in their external environments. The concepts of dominant logic and sector importance were used to develop predictions about which external domains and which internal domains should receive relatively more or less scanning emphasis in external environments that, overall, are more dynamic or more stable. A field survey of 105 single‐business manufacturing firms evaluated CEOs' scanning emphases and firm performance. Results indicated that, for dynamic external environments, relatively more CEO attention to the task sectors of the external environment and to innovation‐related internal functions was associated with high performance. In stable external environments, however, simultaneously increased scanning of the general sectors in the external environment and efficiency‐related internal functions produced higher performance. These relationships were strongest between relative scanning emphases among domains and sales growth. We discuss the implications of these results for researchers and practitioners. Copyright © 2003 John Wiley & Sons, Ltd.     

Firm‐specific knowledge assets and employment arrangements: Evidence from CEO compensation design and CEO dismissal

Research summary : We argue that firms with greater specificity in knowledge structure need to both encourage their CEOs to stay so that they make investments with a long‐term perspective, and provide job securities to the CEOs so that they are less concerned about the risk of being dismissed. Accordingly, we found empirical evidence that specificity in firm knowledge assets is positively associated with the use of restricted stocks in CEO compensation design (indicating the effort of CEO retention) and negatively associated with CEO dismissal (indicating the job securities the firm committed to CEOs). Furthermore, firm diversification was found to mitigate the effect of firm‐specific knowledge on both CEO compensation design and CEO dismissal, as CEOs are more removed from the deployment of knowledge resources in diversified firms. Managerial summary : A firm's knowledge structure, that is, the extent to which its knowledge assets are firm‐specific versus general, has implications for both CEO compensation design and CEO dismissal. In particular, we find that a firm with a high level of firm‐specific knowledge has the incentive to retain its CEO through the use of restricted stocks in CEO compensation. Such a firm is also likely to provide job security for its CEO, leading to a lower likelihood of CEO dismissal. These arguments, however, are less likely to hold in diversified corporations as CEOs in such corporations are more removed from the deployment of knowledge assets. A key managerial implication is that CEO compensation and job security design should be made according to the nature of firm knowledge assets. Copyright © 2016 John Wiley & Sons, Ltd.     

She'‐e‐os: gender effects and investor reactions to the announcements of top executive appointments

This study uses Kanter's token status theory to link announcements of top executives to shareholder reactions, highlighting possible gender effects. Using a sample of top executive announcements from 1990 to 2000, our results show that investor reactions to the announcements of female CEOs are significantly more negative than those of their male counterparts. Furthermore, women who have been promoted from within a firm are viewed more positively than women who come from outside. To supplement our analysis of investor reactions, we also analyze the text of popular press articles surrounding the announcements of male and female CEOs. These results show that articles about the appointment of a female CEO tend to emphasize gender, gender‐related and other job or organizational considerations. Copyright © 2007 John Wiley & Sons, Ltd.     

Higher Highs and Lower Lows: The Role of Corporate Social Responsibility in CEO Dismissal

Research summary: Investing a firm's resources in corporate social responsibility (CSR) initiatives remains a contentious issue. While research suggests firm financial performance is the primary driver of CEO dismissal, we propose that CSR will provide important additional context when interpreting a firm's financial performance. Consistent with this prediction, our results suggest that past CSR decisions amplify the negative relationship between financial performance and CEO dismissal. Specifically, we find that greater prior investments in CSR appear to expose CEOs of firms with poor financial performance to a greater risk of dismissal. In contrast, greater past investments in CSR appear to help shield CEOs of firms with good financial performance from dismissal. These findings provide novel insight into how CEOs' career outcomes may be affected by earlier CSR decisions. Managerial summary: In this study, we examined a potential personal consequence for CEOs related to corporate social responsibility (CSR). We explored the role prior investments in CSR play when a board evaluates the firm's financial performance and considers whether or not to fire the CEO. Our results suggest that while financial performance sets the overall tone of a CEO's evaluation, CSR amplifies that baseline evaluation. Specifically, our results suggest that greater past investments in CSR appear to (a) greatly increase the likelihood of CEO dismissal when financial performance is poor, and (b) somewhat reduce the likelihood of CEO dismissal when financial performance is good. Thus, striving to deliver profits in a socially responsible manner may have both positive and negative personal consequences. Copyright © 2017 John Wiley & Sons, Ltd.     

The impact of CEO core self‐evaluation on the firm's entrepreneurial orientation

Although much has been attributed to a CEO's personality, one particularly intriguing, and as yet unexplored, investigation is its impact on the firm's entrepreneurial orientation. Additionally, despite calls from the upper‐echelon literature, CEO personality research has been hobbled by the absence of a unifying construct that captures core dimensions of personality, and by the difficulty in obtaining such intimate assessments from executives. Building on recent advances in personality research, in particular the identification and validation of the core self‐evaluation construct that captures the core facets of an executive's sense of self‐potency, we develop and test a model of the impact of CEO core self‐evaluation on entrepreneurial orientation. Then, consistent with upper echelons and personality theory, we specify the contingent role of environmental dynamism. Using multisource data from a sample of CEOs and their top management teams from 129 firms, including a time‐lagged assessment of the firm's entrepreneurial orientation, we find evidence to suggest that CEOs whose personalities reflect higher core self‐evaluations have a stronger positive influence on their firms' entrepreneurial orientation. In addition, we find that this influence is particularly strong in firms facing dynamic environments, but negligible in stable environments. Copyright © 2009 John Wiley & Sons, Ltd.     

The differential effects of CEO narcissism and hubris on corporate social responsibility

Research Summary: While prior studies have predominantly shown that CEO narcissism and hubris exhibit similar effects on various strategic decisions and outcomes, this study aims to explore the mechanisms underlying how narcissistic versus hubristic CEOs affect their firms differently. Specifically, we investigate how peer influence moderates the CEO narcissism/hubris—corporate social responsibility (CSR). With a sample of S&P 1500 firms for 2003–2010, we find that the positive relationship between CEO narcissism and CSR is strengthened (weakened) when board‐interlocked peer firms invest less (more) intensively in CSR than a CEO's own firm; the negative relationship between CEO hubris and CSR is strengthened when peer firms are engaged in less CSR than a CEO's own firm. Managerial Summary: Some CEOs are more narcissistic while others may be more hubristic, but these two groups of CEOs hold different attitudes toward the extent to which their firms should engage in corporate social responsibility (CSR). Our findings with a large sample of U.S. publically listed firms suggest that narcissistic CEOs care more about CSR, but hubristic CEOs care less. Interestingly, when narcissistic CEOs observe their peer firms engaging in more or less CSR than their own firms, they tend to respond in an opposite manner; in contrast, hubristic CEOs will only engage in even less CSR when their peers also do not emphasize CSR. Our findings point to a fundamental difference between CEO narcissism and hubris in terms of how they affect firms' CSR decisions based on their social comparison with peer firms.     

Stakeholder management as a predictor of CEO compensation: main effects and interactions with financial performance

We test the effects of stakeholder management on CEOs' salaries, bonuses, stock options, and total compensation. We also examine the extent to which the interaction of stakeholder management and financial performance determines compensation. Using a longitudinal database of 406 Fortune 1000 firms, our results suggest that stakeholder management is relevant to boards of directors when setting CEO compensation. Specifically, we found a significant, negative main effect of stakeholder management on CEO salaries. Further, we found that stakeholder management typically reduces the rewards CEOs may get for increasing levels of financial performance. In tandem, these results indicate that CEOs may jeopardize their personal wealth by pursuing stakeholder‐related initiatives. Copyright © 2005 John Wiley & Sons, Ltd.     

Stepping across for social approval: Ties to independent foundations' boards after financial restatement

Research Summary: Integrating research on independent philanthropy and organizational misconduct, we argue that affiliations with independent foundations provide social approval benefits for firms that restate their financials. We use a panel of S&P 500 companies from 2004 to 2011 to investigate the addition of foundation board ties by restating firms. CEOs of restating firms add more new foundation board ties than CEOs of non‐restating firms, while existing corporate philanthropy and greater corporate reputation diminish this effect. We also find that new ties to foundations boards influences media tenor for restating firms more than it does for non‐restating peers. Our study offers a nuanced analysis of the post‐crisis actions of restating firms relative to non‐restating peers and highlights the relevance of ties to nonprofit boards for corporate governance. Managerial Summary: Firms oftentimes fire their top executives in the aftermath of misconduct, but such response is itself disruptive for the firm's operations. Instead, we suggest that forging ties to independent foundations can help firms in such contexts without unsettling effects. Our results show that, after a restatement event, CEOs of misconduct firms are especially likely to join new foundation boards as trustees and thus seem to be aware of the benefits of these associations. CEOs from firms with existing in‐house philanthropy or a high reputation do not join as many new foundations' boards of trustees. We also find that new firm‐foundation links are promptly and positively evaluated by the media, thus helping misconduct firms regain social approval.