Powerful CEOs,debt financing,and leasing in Chinese SMEs: Evidence from threshold model

This study investigates the impacts of CEO power on firm financing policies (i.e. debt financing and operating leasing) using the Caner and Hansen (2004) instrumental variable threshold regressions approach. The sample consists of a panel of 297 Chinese listed small and medium sized enterprises (SMEs) over the period 2009–2012. The empirical results indicate that there are threshold effects in the CEO power-debt relationship and CEO power-operating lease relationship. In particular, we find that firms tend to use more debt financing (and operating leasing) when CEO power index below a certain threshold level; beyond the threshold level, CEO tends to manipulate firm capital structure to pursue their own interests, thus using less debt financing and operating leasing. In addition, our estimation results suggest a positive relationship between debt and operating leases when CEO power is smaller than certain threshold, while it becomes negative if the power index exceeds the threshold level.     

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.     

Does organization capital matter? An analysis of the performance implications of CEO power

Chief executive officer (CEO) power reflects the ability of the CEO to influence the firm's decision-making. Whether the CEO of the firm could manage the firm’s investment assets to support maximizing the efficiency of resource allocation is an important issue. As previous studies found, organization capital is a key intangible asset that improves the firm’s production efficiency and affects long-term performance. This study explores how CEO power affects organization capital investments and how it further affects the efficiency of firm resource allocation. We use the following three variables to measure CEO power: CEO founder, CEO-only insider and CEO duality. Our results indicate that the level of CEO power can influence a firm’s value by controlling the organization capital. When the firm’s CEO is also the founder, the CEO will attempt to increase investments in organization capital to create growth opportunities for the firm, which will therefore increase the firm's value. Specifically, when the company is in financial distress, the powerful CEO's increasing in organizational capital investment will expose the company to greater risk of loss of intangible assets. This result may further increase the company's price volatility.     

CEO自恋对创新绩效的影响研究 ——基于企业异质性的调节作用

从CEO心理特征视角出发,探究了CEO自恋与企业创新绩效之间的关系。以2011—2016年A股135家上市公司的纵向数据为样本,通过广义估计方程模型进行实证检验。研究发现:CEO自恋对企业创新绩效具有显著促进作用。进一步研究发现,CEO自恋对企业创新绩效的影响受到企业异质性的调节作用:相比小规模企业,大规模企业中CEO自恋对创新绩效的促进作用更显著;相比低财务杠杆企业,高财务杠杆企业中CEO自恋对创新绩效的促进作用更显著;相比非国有企业,国有企业中CEO自恋对创新绩效的促进作用更显著。     

CEO hometown identity and firm green innovation

Drawn on the upper echelons theory, this study investigates how chief executive officer (CEO) hometown identity drives firm green innovation. We propose that CEO hometown identity has a positive impact on a firm's green innovation performance. Furthermore, we explore the moderating role of managerial discretion determined by organizational and environmental factors (i.e., institutional ownership and market complexity). We propose that institutional ownership negatively moderates the positive relationship between CEO hometown identity and green innovation, but market complexity plays a positive moderating role. Using Chinese publicly listed firms from 2002 to 2016 in heavily polluting industries, our findings support these hypotheses. Our research contributes to the upper echelons theory and corporate social responsibility literature and has substantial practical implications.     

Human Capital and CEO Compensation during Institutional Transitions

Firms appoint CEOs with different types of human capital in order to manage resource dependencies. How CEOs are compensated thus can be conceptualized as a valuation process of how boards view the value of CEOs' human capital. Two types of human capital – international experience and political ties – have emerged as potential drivers of CEO compensation during institutional transitions. But how they impact CEO compensation has remained unclear. We develop a resource dependence‐based, contingency framework to focus on the external and internal factors that enable or constrain human capital to impact CEO compensation. Because of the tremendous regional diversity within China, externally, we focus on the level of marketization of the region in which firms are headquartered. Internally, we pay attention to two corporate governance mechanisms: politically connected outside directors and compensation committee. Data from 10,329 firm‐year observations at 94 per cent of listed firms in China largely support our framework. Overall, our study contributes to resource dependence research by extending this research to the context of institutional transitions with a focus on how human capital impacts CEO compensation.     

The impact of appointment-based CEO connectedness on firms’ performance and profitability

This paper investigates whether the performance variables of newly added intangible capital elements give the appointment relationship a deeper impact on the firms’ performance and profitability. We document that after correcting for endogeneity, when considering intangible capital, Total Q is a better proxy than Tobin’s Q for explaining the effect of appointment-based CEO connectedness on firm performance and profitability. Furthermore, we show that the influence of directors on company performance and profitability is more important than that of executives or managers. We also find that the stronger the appointment relationship, the worse the company’s performance and profitability. We further provide a series of alternative interpretations and robustness test evidence showing that intangible capital is more important for high technology and internet firms than industrial firms. Further, we find that the greater the number of executives appointed by the CEO, the better the firm’s research and development, but the worse the firm’s investment policy.     

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.     

Myth or reality? Assessing the moderating role of CEO compensation on the momentum of innovation in R&D

This study researches the influences of CEO compensation on firm behavior to examine the interactive relationship between the behavioral momentum of innovation in R&D and CEO compensation. The models presented in this study are based on evolutionary, institutional, and agency theories to test hypotheses using data from 107 companies in the high-technology sectors in the United States. The results indicate that the pre-succession innovative behavior of these high-technology firms on R&D can positively affect these firms' post-succession innovative behavior towards R&D. That is, positive momentum in R&D innovation prevails in a firm across a change of the CEO. However, for the role of CEO compensation, short- and long-term compensation does not positively moderate this behavioral momentum in R&D. Hence, the moderating impact of short- and long-term CEO compensation to enhance the momentum of innovation in R&D can be romanticized. These findings provide boards of directors with evidence as to how a CEO succession matters to a firm's behavioral momentum in R&D, and whether CEO compensation can be strategized to change a firm's innovation and momentous behavior.     

Is synergy always good? Clarifying the effect of innovation capital and customer capital on firm performance in two contexts

The resource-based view (RBV) posits that a firm can leverage the effect of existing capital on firm performance via capital configuration, complementarity, and integration, but little empirical research has addressed these issues. This study investigates the effects of innovation capital and customer capital on firm performance, whether their complementary interactions are important determinants of relative firm performance within the industry, and whether these effects considerably differ significantly between high- and low-technology manufacturing firms. Based on data collected from 312 high-technology manufacturing firms and 204 low-technology manufacturing firms in the Taiwanese manufacturing industry, the results of SEM analyses demonstrate that the main effects of both innovation and customer capital significantly and positively impact firm performance. The analytical results demonstrate that: (1) a significant interaction effect only exists in the high-technology manufacturing firms; (2) the main effect of customer capital is lower among high-technology manufacturing firms; (3) the main effect of innovation capital is the same for both high- and low-technology manufacturing firms. Additionally, this investigation also discusses the limitations of the current research, future research directions, and the theoretical and practical implications of the empirical analysis.     

Regional development and sources of superior performance across textile and IT sectors in Taiwan

The rapid growth and industrialization of Taiwan's textile and IT sectors, mainly comprised of small and medium-sized enterprises, has prompted an array of explanations among academics, including neoliberalism, structural-institutionalism, flying geese patterns, regional networks and economic geography. Drawing on neoliberal, structural-institutional, regional networking and economic geographic views in that strong Taiwanese entrepreneurial culture is important to its textile and IT sector development, this study shares their positive perspectives in influencing the sources of profitability differentials among Taiwan's textile and IT firms in international competitiveness. Researchers investigating the sources of performance differences among firms have focused mainly on the relative importance of industry and firm factors. Specifically, this study employs Taiwan's business database to examine industry and firm effects on profitability differentials in these sectors using return on assets and the economic performance measures of economic value added and market value added. A variance components model is proposed, and findings indicate that firm effects dominate performance while industry effects have little impact. Our discussion reconciles results with those of previous studies.     

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.     

Value relevance on intellectual capital valuation methods: the role of corporate governance

Development of a knowledge economy has changed the main value of a firm from traditional physical assets to intellectual capital or intangible assets. Therefore, the accumulation and management of intellectual capital is the competitive advantage of knowledge-based industries. Intellectual capital valuation is the essential factor in firm valuation. Scholars have presented valuation methods of intellectual capital, such as Tobin’s Q, Knowledge Capital Earnings (KCE), and Value Added Intellectual Coefficient (VAIC). Management power of modern firms is separate from ownership, and easily occurs in the agency problem; therefore, firms must implement corporate governance to solve this problem. Researchers have presented that a complete appraisal of the firm value includes the effect of corporate governance. This study is the first to apply multi-regression models to examine value relevance on valuation methods of intellectual capital, and to further analyze the role of corporate governance for the information and electronic industry in Taiwan. The results show that Tobin’s Q, KCE, and VAIC have a positive relationship to firm value. The characteristic of director board, including board size, the ratio of outside directors, employed independent directors, and the manager concurrently the director, are correlated with the valuation of intellectual capital.     

Managerial incentives and R&D investments: The moderating effect of the directors’ and officers’ liability insurance

Literature regarding the impact of managerial incentives on firm’s research and development (R&D) investments suggests that due to the riskiness of R&D activities, firms need to provide managerial incentives to encourage managerial discretion on corporate long-term investments of R&D. In spite that managerial incentives influence corporate R&D spending, some also argue corporate R&D spending a function of managerial incentive schemes. This paper applies the simultaneous equation to investigate the association between managerial discretion on R&D investments and the incentive scheme of CEO compensations by using the sample firms listed in Taiwan Security Exchange and Taipei Exchange. The results indicate that the listed firms in Taiwan simultaneously determine corporate R&D investments and CEO compensations. They reward their CEOs in compliance with their efforts on R&D investments and CEO compensation motivates CEOs to align their interests with firms’ long-term investments on R&D. A further analysis of the protection effect from the directors’ and officers’ (D&O) liability insurance suggests that D&O protection intensifies the relationship between R&D investments and CEO compensation. It encourages CEOs to allocate resources on R&D activities and make CEO incentive contracts efficacious on corporate long-term investments. The result is robust in the electronic industry of Taiwan.     

Who Appoints Them,What Do They Do? Evidence on Outside Directors from Japan

Although reformers often claim Japanese firms appoint inefficiently few outside directors, the logic of market competition suggests otherwise. Given the competitive product, service, and capital markets in Japan, the firms that survive should disproportionately be firms that tend to appoint boards approaching their firm‐specifically optimal structure. The resulting debate thus suggests a test: do firms with more outsiders do better? If Japanese firms do maintain suboptimal numbers of outsiders, then those with more outsiders should outperform those with fewer; if market constraints instead drive them toward their firm‐specific optimum, then firm characteristics may determine board structure, but firm performance should show no observable relation to that structure. We explore the issue with data on the 1000 largest exchange‐listed Japanese firms from 1986 to 1994. We first ask which firms tend to appoint which outsiders to their boards. We find the appointments decidedly nonrandom. Firms appoint directors from the banking industry when they borrow heavily, when they have fewer mortgageable assets, or when they are themselves in the service and finance industry. They appoint retired government bureaucrats when they are in construction and sell a large fraction of their output to government agencies, and they appoint other retired business executives when they have a dominant parent corporation or when they are in the construction industry and sell heavily to the private sector. Coupling OLS regressions with two‐stage estimates on a subset of the data, we then ask whether the firms with more outside directors outperform those with fewer, and find that they do not. Instead, the regressions suggest—exactly as the logic of market competition predicts—that firms choose boards appropriate to them.     

Knowledge flow and inter-firm networks: The influence of network resources,spatial proximity and firm size

The objective of this paper is to analyse the characteristics and nature of the networks that firms utilize to access knowledge and facilitate innovation. The paper draws on the notion of network resources, distinguishing two types: social capital–consisting of the social relations and networks held by individuals; and network capital–consisting of the strategic and calculative relations and networks held by firms. The methodological approach consists of a quantitative analysis of data from a survey of firms operating in knowledge-intensive sectors of activity. The key findings include: social capital investment is more prevalent among firms frequently interacting with actors from within their own region; social capital investment is related to the size of firms; firm size plays a role in knowledge network patterns; and network dynamism is an important source of innovation. Overall, firms investing more in the development of their inter-firm and other external knowledge networks enjoy higher levels of innovation. It is suggested that an over-reliance on social capital forms of network resource investment may hinder the capability of firms to manage their knowledge networks. It is concluded that the link between a dynamic inter-firm network environment and innovation provides an alternative thesis to that advocating the advantage of network stability.     

HRM in New Zealand biotechnology SMEs: emergence of employment systems through entrepreneurship

Biotechnology is an industry where human resources embody the knowledge and thereby the competitive strength of the firm. Strategic HRM models have established the importance of resource dependency and institutional perspectives in understanding small biotechnology firms. These models, however, have seldom included the impact of managerial agency, particularly with regard to the role of the founder-scientist. Using three exploratory case studies of biotechnology small and medium enterprises (SMEs), we examine the role of founder-scientists in addressing the requirements of institutional legitimacy and scarce resources (human and capital) in their firms.     

Doing good or choosing well? Corporate reputation,CEO reputation,and corporate financial performance

Using data from Taiwan’s top 150 listed companies over the period 2003 to 2014, our study explores the influence of CEO reputation and corporate reputation on the financial performance of companies. The analysis focuses especially on the interaction between CEO reputation and corporate reputation to identify which dimension of reputation is more relevant to firm performance. We show that, though both corporate reputation and CEO reputation have an individual impact that benefits the financial performance of the company, the impact of CEO reputation is more persistent across different time periods and more comprehensive across different industries. Furthermore, we find that CEO reputation still has a positive impact on firm performance when corporate reputation is poor, indicating that CEO reputation is more important to firm performance. To pursue better financial performance, should a company make greater effort to build a good corporate reputation, or merely recruit a CEO with a good reputation? Our suggestion here is simple: “choosing well” is better than “doing good.”     

Friend or foe? Employee ownership and CEO dismissal

This paper examines 2 research questions. First, does the level of employee stock ownership impact the likelihood of dismissing poorly performing chief executive officers (CEOs)? Second, does the level of employee stock ownership affect the likelihood of appointing an outsider or an insider after the dismissal of an incumbent CEO? We suggest that employee stock ownership reinforces the firm performance—CEO dismissal link because employee shareholders' welfare consisting of fixed claims (wages, bonuses, etc.), residual claims (dividends, increase in stock value, etc.), and human capital (generic and idiosyncratic) are highly linked to their firm performance. Moreover, under conditions of poor performance, employee shareholders are likely to favor an outsider CEO because he or she is more likely to initiate and implement drastic changes to the strategy of the firm, and therefore, he or she is more likely to improve firm performance. Drawing on a longitudinal sample of French firms, we find that employee stock ownership strengthens the negative relationship between firm performance and CEO dismissal likelihood. We find also that the higher employee ownership, the more likely that the underperforming CEO is replaced by an outsider. In contrast, employee ownership has no moderating impact on the likelihood of insider CEO appointment.     

The impact of executive diversity on corporate innovation: Evidence from the natural experiment of high‐speed rail in China

We examine the impact of executive diversity on corporate innovation using an exogenous natural experiment: the implementation of high‐speed rail (HSR) in China. The findings suggest that after a city implements HSR, firms increase their executive diversity, resulting in better corporate innovation than firms in non‐HSR cities. Additional analysis suggests that when a firm belongs to a competitive industry, is located in a low marketization region, or operates in a poor transportation region, the impact of HSR on executive diversity and corporate innovation is magnified. Our findings carry implications for other emerging markets.