Corporate strategy,executive selection,and firm performance

This article investigates three related questions: (1) Is corporate diversification strategy associated with the level of firm-specific experience (tenure) of selected CEOs? (2) Are tenure levels of selected CEOs related to subsequent organizational performance? and (3) Does diversification strategy influence the impact that CEO firm-specific experience has on subsequent organizational performance? Results indicate that while diversification levels do not relate to extent of tenure, the selection of CEOs with lower levels of firm-specific experience results in significantly improved performance among nondiversified firms. No such relationship is observed in more diversified firms.¹ © 1998 John Wiley & Sons, Inc.     

Experience Matters? The Impact of Prior CEO Experience on Firm Performance

We sample CEOs of the 2005 S&P 500 corporations to look at the relationship between experience in the CEO position of a different firm and the post‐succession financial performance of the firm that they currently lead. We find that experience in the CEO position is negatively related to firm performance. CEOs who directly move to their current CEO position from the previous one and those with job‐specific experience in the same or related industry or at the helm of a previous company similar in size to the current one are associated with significantly lower post‐succession performance than those without prior CEO experience. The results contribute to the literatures on CEO succession, the performance effect of job‐specific experience, and the transferability of human capital. © 2014 Wiley Periodicals, Inc.     

CEO Experiences: Effects on the Choice of FDI Entry Mode*

abstract Drawing on the strategic management and international business literatures, this study examines the relationships between the experiences of newly selected CEOs and their choice of foreign direct investment (FDI) entry modes. Based on a sample
of 380 foreign market entry events involving acquisitions, greenfield investments, and joint ventures, our findings indicate that CEOs with less firm experience preferred acquisitions and greenfield investments to joint ventures and, older CEOs were more likely to opt for joint ventures over greenfield investments. In addition, CEOs with throughput functional experience favoured acquisitions over joint ventures and greenfield investments. Finally, CEO international experience was associated with a greater propensity to choose greenfield investments and acquisitions over joint ventures and also greenfield investments over acquisitions. The implications of the findings from the perspective of theory and managerial practice are discussed, along with possible directions for future research.     

Directors' Pay and Turnover: An Application to a Sample of Large UK Firms

This paper examines the operation of the UK managerial labour market. We test the twin agency predictions that directors' pay is positively related to corporate performance and CEO turnover is negatively associated with firm profitability. We find that (i) the panel data econometric evidence reveals a significant and positive correlation between directors' pay, company performance and size, (ii) the CEO turnover model predicts a negative, and significant, association with pre-dated shareholder returns: the data is consistent with the view that CEOs are disciplined by the threat of dismissal, (iii) boardroom governance factors (e.g. proportion of non-executives and board size) are only of some importance in the CEO succession process.     

Conformity or divergence in describing the business concept and profitability

The relationship between conformity or divergence in the way CEOs and chief financial officers describe the business concept, and profitability, was studied in 20 firms in one industry. Measures were obtained for firm size, profitability, degree of conformity, organizational stability, product development and the CEO's influence on strategic decisions. Controlling for the effect of size, the relationship was analysed in stepwise multiple regression analyses. Conformity was positively correlated to profitability in stable organizations, and (weakly) to divergence in unstable ones. These findings are consistent with those reported in studies of top management team consensus and performance, which suggest that environmental turbulence has a moderating effect on the relationship. It is concluded that environmental contingency factors affect the conformity-profitability relationship by way of organizational processes. Consequently, differences in organizational stability should be taken into account in studying the impact of environmental conditions on this relationship.     

企业成长性、CEO财务专长与企业价值

中国有一个成语叫"南橘北枳",意思是同一个物种在不同的生长环境下会表现出不同的性状.举一反三,企业管理者的才能是否也会因为组织环境的差异而发挥不同的作用?本文结合企业的成长性水平,从投资行为和成本管控的视角,系统分析与检验了CEO财务专长对企业价值的影响.研究结果显示,对于高成长性企业,财务出身的CEO会抑制企业的投资水平,易错失投资机会,有损企业价值;而对于低成长性企业,CEO的财务专长则有助于企业实现成本领先,提升企业价值.路径检验发现,对于高成长性企业,CEO的财务专长对企业价值的影响存在部分的投资水平路径;对于低成长性企业,CEO的财务专长对企业价值的影响存在部分的成本管控路径.进一步研究发现,CEO财务专长对企业投资水平、企业价值的抑制作用,只存在于具备高成长性的国有企业之中;成长性水平降低后,无论是国有企业还是民营企业,具有财务专长的CEO均能够显著提高企业成本管控水平,促进企业价值上升.     

The Value of CEO Mobility: Contextual Factors That Shape the Impact of Prior CEO Experience on Market Performance and CEO Compensation

This study examines the value that prior CEO experience has for the companies that hire such CEOs—as reflected in the firms’ subsequent market‐based performance—as well as its value for the CEO that possesses this experience—as reflected in his or her initial compensation. While we suggest that shareholders tend not to benefit from firms hiring experienced CEOs, we also argue that particular firm and industry contextual factors that shaped the prior CEO experience help ameliorate this detrimental effect. Regardless, we also suggest that prior CEO experience generally stands to benefit the CEOs, in that it brings them a compensation premium over those CEOs without such prior experience. We tested our hypotheses on a sample of 654 US CEO succession events that occurred between 2001 and 2004 and found broad support for our hypotheses. We close with a discussion of the implications of our findings for future research as well as what they mean for firms hiring experienced CEOs and for CEO careers more generally. © 2015 Wiley Periodicals, Inc.     

RECEIPT OF INFORMATION AND INFLUENCE OVER DECISIONS IN HOSPITALS BY THE BOARD, CHIEF EXECUTIVE OFFICER AND MEDICAL STAFF

This article examines relationships between receipt of internal administrative information in hospitals, influence over general management decisions, and the extent to which certain organizational characteristics predict the receipt of information by each of the three major groups in hospitals: the board, the CEO, and the medical staff. Using a US national sample of 287 non-profit community hospitals, CEOs were found to receive the greatest amount of information and had highest influence while medical staffs were lowest on both measures. of five major organizational characteristics, hospital size emerged as the single strongest predictor of receipt of information for both boards (beta =?0.28, p 0.001) and medical staffs (beta =?0.42, p 0.001). Overall, the five dependent variables explained 18 per cent of the variance in receipt of information by boards and 28 percent of the variance for medical staffs.     

CEO overconfidence and labor investment efficiency

We examine the impact of CEO overconfidence on labor investment efficiency (LIE). The findings suggest that firms with overconfident CEOs are more likely to have lower LIE. The findings are robust to alternative measures of CEO overconfidence and LIE and after accounting for endogeneity and CEO experience, age, managerial ability, high tech industry, and economic recession. Further analysis shows that: i) our findings are not due to the relation between net hiring and contemporaneous non-labor investments and the difference between high- and low-skilled labor, ii) firms with more analyst following, financially constrained firms, and firms located in states with wrongful discharge laws force CEOs to invest more efficiently in labor. In contrast, firms with dominant CEOs or facing high economic policy uncertainty are less efficient in labor investments, iii) firms with overconfident CEOs exhibit higher labor cost stickiness than those of non-overconfident CEOs, and iv) a lower LIE caused by CEO overconfidence has negative impacts on a firm's future profitability.     

CEO succession with gender change in troubled companies: The effect of a new woman CEO on firm risk and firm risk perceived

The replacement of the CEO is one of the first actions a troubled company may take to recover from a critical situation. In this paper, we analyze the change in firm risk and firm risk perception when women are replacing men as CEOs of troubled companies. The analyses are based on a comprehensive dataset covering all registered companies in Norway from 2005 to 2014. We argue that a new woman CEOs increase the chances of improving the risk situation of troubled companies. Building on CEO succession and social identity theories, we study the firm risk situation under the lenses of risk perception and firm risk, and we find that a newly appointed woman CEO, following a man, tend to decrease the level of risk of the company. Furthermore, we find counterbalancing effects on these changes given the moderation effect of women on the board.     

CEO Succession Origin and Firm Performance: A Multilevel Study

There has been much controversy concerning the relationship between outside CEO succession origin and firm performance. Some scholars take the organizational‐adaptation view to highlight the benefits of outside succession; yet others adopt the organizational‐disruption view to pose the selection of an outsider CEO as a disruptive and disadvantageous event for organizations. In this study, we develop an integrated multilevel framework that reconciles these opposing perspectives and examines the conditions under which the benefits of outside CEO succession outweigh the costs. Data from 109 CEO succession events in large international firms show that the performance advantages of outside succession materialize when the new CEO: (a) socio‐demographically resembles incumbent executives, (b) possesses a variety of experience, and (c) is hired by a well‐performing firm operating in a munificent industry. Overall, our research demonstrates that the performance implications of new CEO origin should not be considered in isolation, but in interaction with multilevel characteristics.     

Seeking distinctiveness through divestments: CEO succession and the effect of demographic similarity on the divestment of predecessor's investments

Why do successor CEOs divest those organizational units that they divest shortly after taking office? In order to contribute to this question, we take a behavioral perspective and develop a theoretical framework that draws on pioneering work in social psychology, in particular, research on individuals' need for distinctiveness and argue that demographic similarity to their CEO predecessors may evoke negative affect as it threatens CEO successors' need for distinctiveness. Assuming that CEOs are high need for distinctiveness individuals, we argue that negative emotions associated with similarity to their CEO predecessors are likely to force CEO successors to engage in behavioral coping strategies aimed at restoring a sense of distinctiveness. In particular, we predict and empirically observe that demographic similarity increases the likelihood that in their pursuit of distinctiveness, CEO successors deliberately divest specific organizational units, namely, those that their CEO predecessors had invested in.     

CEO compensation: does it pay to be green?

The relationship between chief executive officer (CEO) compensation and various organizational variables (i.e., size, length of tenure of the CEO, board composition and firm performance) has been explored in academic research. However, the relationship between CEO compensation and the firm's reputation based on the firm's commitment to the community and the environment has been relatively unexamined in the academic research. This study's purpose is to empirically examine this relationship using the Fortune Reputation Index as revised by Brown and Perry (1995) . Using a sample of 186 firms in 1990 and 188 firms in 1991, the relationships between CEO compensation and organization size, financial performance and environmental reputation are examined. The results of the study demonstrate that there is a strong relationship between CEO compensation and firm environmental reputation, firm size and firm financial performance. Copyright © 2001 John Wiley & Sons, Ltd. and ERP Environment     

CEO Overconfidence and Overinvestment Under Product Market Competition

How does product market competition influence whether CEOs with greater or lower levels of overconfidence are hired and whether CEOs overinvest in innovation? In a Cournot model in which firms hire a CEO to take charge of research and development (R&D) investment and production decisions, this paper shows that CEO overconfidence and overinvestment can be explained as an equilibrium outcome. More importantly, the intensity of product market competition and the equilibrium CEO overconfidence level (and R&D investment) exhibit an inverted U‐shaped relationship. As the product market tends toward perfect competition, all firms hire a realistic CEO and do not overinvest. Copyright © 2014 John Wiley & Sons, Ltd.     

Dealing with celebrity and accountability in the top job

Today, human resource executives assume prominent leadership roles in their firms and play important roles in the strategy process. Along with the expansion and evolution of the HR function, the responsibilities of coordination, control, and accountability for organizations and their leaders, particularly the CEO, remain. Forming strong relationships with CEOs thus is viewed as one way to encourage HR's prominence in the firm's overall success, particularly its financial health. In recent years, CEOs' presence in the mass media has surged as well, with some CEOs achieving celebrity status. Celebrity status has the potential to increase CEO discretion, decrease CEO accountability, and expand firm resources. As such, achieving celebrity status can affect the relationship between CEOs and HR executives in regard to accountability. In this article, we discuss accountability as a key job demand and address some of the complexities and dynamics of CEO accountability. © 2007 Wiley Periodicals, Inc.     

Ceo Locus of Control and Small Firm Performance: an Integrative Framework and Empirical Test*

Previous research on the impact of chief executive officer (CEO) locus of control is mainly based on simple and partial mappings of bivariate associations between CEO locus of control and organizational outcomes. In addition, distinct substreams have emerged in which intricately related phenomena are studied separately. to overcome this fragmentation and polarization, we provide and empirically test an integrative framework based on previously tested hypotheses on the impact of CEO locus of control. Our approach differs from prior research in two ways. First, it simultaneously takes account of strategic choice and firm performance in order to assess the extent to which strategy mediates the relationship between CEO locus of control and organizational performance. Second, we consider the CEO to be both a formulator and implementor of organizational strategies. Besides the observation that CEO locus of control seems to matter a lot in terms of explaining organizational performance in the present sample, our results demonstrate that an integrative approach increases our insight into the impact of CEO locus of control by revealing why some CEOs achieve higher organizational performance than others.     

Innovating Beyond the Horizon: CEO Career Horizon,Top Management Composition,and R&D Intensity

Decreasing research and development (R&D) can impair the ability of firms to remain innovative in the long run. CEOs have been accused of curtailing R&D investments as they approach expected retirement, yet received findings on R&D investment behaviors of late‐career CEOs are mixed. We argue that one reason for these inconsistent findings could be that traditional approaches overlook the fact that CEOs are not isolated agents in making R&D decisions. We build on the premise that CEOs interact with their top management team (TMT) when shaping R&D strategy and advance a contextualized view of CEO dispositions in their late career stages as being constrained or enabled by their TMT. We hypothesize that some TMT attributes (e.g., tenure and age) may amplify, whereas others (e.g., functional experience and education) may mitigate inclinations to reduce R&D. Our findings, based on a longitudinal sample of 100 US manufacturing firms from 1998 to 2008, provide nuanced insights into how different TMT characteristics influence CEO‐TMT dynamics, with TMT age and TMT tenure playing particularly pronounced roles. We discuss implications of our CEO‐TMT interface approach for theory and practice. © 2015 Wiley Periodicals, Inc.     

In Pursuit of Greatness: CEO Narcissism,Entrepreneurial Orientation,and Firm Performance Variance

Building upon the perspective that narcissism is a leadership trait with both ‘bright’ and ‘dark’ sides, the present study examines the question of whether companies led by narcissistic CEOs exhibit higher levels of entrepreneurial orientation (EO). Moreover, this research examines whether EO partially explains why narcissistic CEO‐led firms experience greater variability in firm performance. Using survey data collected from 173 CEOs, and an archival measure of firm performance variance, we find support for our model. These findings offer an improved understanding of how CEO narcissism influences performance variance, and why the firms they lead may even, at times, be viewed as on a path to success. Study implications are discussed.     

CEO股票期权激励与并购决策关系研究——代理成本的中介作用和CEO过度自信的调节作用

运用美国上市银行1998—2014年的数据,将股票期权激励、代理成本、CEO过度自信与并购决策纳入统一的框架进行研究,以代理成本为中介变量,CEO过度自信为调节变量,以检验股票期权激励是否会影响并购决策,以及股票期权激励、代理成本、CEO过度自信与并购决策之间的关系。实证结果表明:CEO股票期权激励能够有效刺激其做出并购决策;代理成本对股票期权激励与并购决策的关系存在部分中介效应;CEO过度自信能显著调节股票期权激励与并购决策的关系;CEO过度自信对于股票期权激励与并购决策的关系的调节作用会通过代理成本起作用。     

Firm risk and the power of the Chairman and CEO in a civil law country: evidence from Spain

Many authors have examined the effect of various control mechanisms on firm value, but have devoted little attention to the effect of these mechanisms on firm risk. This paper studies the effect of different variables related to the power of the chairman and chief executive officer (CEO) on firm risk in Spain. Decisions taken by both the chairman and the CEO are very important in order to attain the shareholders' objectives. Thus, decisions relative to both posts can be considered very relevant from the human resources point of view. There is little previous empirical evidence on this topic, and what there is comes from the US. Most results are consistent with what we call a ‘power perspective’. That is, we observe a positive relation between firm risk and combining in the same person the positions of chairman of the board and CEO. We also find a positive relation between firm risk and the status of both leaders as founding partners, and a negative relation between firm risk and board size.