CEO founder status and firm financial performance

Founders create their organizations, yet are often expected to eventually become liabilities to these same organizations. Past empirical research on the relationship between CEO founder status (i.e., is the CEO also the founder?) and firm performance has yielded inconsistent results. This study of 94 founder‐ and nonfounder‐managed firms finds that founder management has no main effect on stock returns over a 3‐year holding period, but that firm size and firm age moderate the CEO founder status–firm performance relationship. Copyright © 2000 John Wiley & Sons, Ltd.     

Institutional ownership,capital structure,and firm performance

In most studies of ownership and firm performance, researchers have assumed different forms of ownership do not interact in their effect on firm strategy or performance. Focusing on the role of institutional owners, this study poses two related questions: (1) What are the relationships between outside institutional shareholdings, on the one hand, and a firm's capital structure and performance, on the other? and; (2) Does the size of stockholdings by corporate executives, family owners, and insider-institutions modify those relationships? The data, collected from 40 pairs of manufacturing firms selected from as many industries over a 3-year period, shows that the size of outside institutional stockholdings has a significant effect on the firm's capital structure. We have also found that family and inside institutional owners' shareholdings moderate the relationship between outside institutional shareholdings and capital structure. Likewise, corporate executives' shareholdings supplement the relationship between outside institutional shareholdings and firms' performance. These findings suggest that internal and external coalitions interact with each other to influence the firm's conduct.     

股权结构与公司绩效的U型关系研究——1997～2000年上市公司的实证研究

本文通过对上市公司 1 997～ 2 0 0 0年的数据的实证分析 ,结果表明 :股权集中度、内部持股比例与公司绩效均呈显著性倒U型相关 ;第一大股东持股比例与公司绩效正相关 ;国家股比例、境内法人股与公司绩效呈显著性U型相关 ,这说明当国家或法人持股比例较低时 ,与公司绩效负相关 ,而在持股比例较高时 ,与公司绩效正相关 ;流通股比例与公司绩效呈U型关系 ,即在流通股比例高低的两端 ,公司绩效均表现出较高水平。     

Corporate governance and the bankrupt firm: An empirical assessment

The incidence of bankruptcy has risen dramatically among firms of all types and sizes in the past decade. Little is known, however, about the effects of alternative governance structures on the propensity of an organization to file Chapter 11 bankruptcy. Relying on logistic regression for periods 5 years and 3 years prior to the bankruptcy, as well as the contemporaneous period, we examine the relationships among independent/interdependent board composition and the structure of CEO/board chairperson positions and the filing of bankruptcy. While controlling for a series of financial indicators and firm size, the results illustrate robust explanatory power for the governance variables for both lagged periods.     

Environmental dynamism,capital structure and performance: a theoretical integration and an empirical test

An ongoing argument in financial management has been how to craft a capital structure which maximizes shareholder wealth. This question has gained prominence within the strategic management field because of the apparent link between capital structure and the ability of firms to compete. By integrating models from organizational economics with the strategic management literature, we are able to theorize that a firm’s capital structure is influenced by environmental dynamism, and that the match between environmental dynamism and capital structure is associated with superior economic performance. Our large‐scale empirical analyses provide supportive evidence for the proposition that competitive environments moderate the relationship between capital structure and economic performance. From a theoretical standpoint, these findings provide another link between capital structure and corporate strategy. More importantly, we are able to move the discussion beyond the limitations of financial risk and incorporate the strategy concept of decision making under uncertainty. For practical application, these findings offer informed advice for managers on how to craft a capital structure. Copyright © 2000 John Wiley & Sons, Ltd.     

Exploration,exploitation, and financial performance: analysis of S&P 500 corporations

The literature suggests that established firms need to balance their exploration and exploitation activities in order to achieve superior performance. Yet, previous empirical research has modeled this balance as the interaction of orthogonal activities. In this study, we show that there is a trade‐off between exploration and exploitation and that the optimal balance between exploration and exploitation depends upon environmental conditions. Using a novel methodology to measure the relative exploration versus exploitation orientation, we find an inverted U‐shaped relationship between the relative share of explorative orientation and financial performance. This relationship is positively moderated by the R&D intensity of the industry in which the firm operates. Copyright © 2008 John Wiley & Sons, Ltd.     

The effect of CEOs on firm performance

The extent to which CEOs influence firm performance is fundamental to scholarly understanding of how organizations work; yet, this linkage is poorly understood. Previous empirical efforts to examine the link between CEOs and firm performance using variance decomposition, while provocative, nevertheless suffer from methodological problems that systematically understate the relative impact of CEOs on firm performance compared to industry and firm effects. This study addresses these methodological problems and reexamines the percentage of the variance in firm performance explained by heterogeneity in CEOs. The results of this study suggest that in certain settings the ‘CEO effect’ on corporate‐parent performance is substantially more important than that of industry and firm effects, but only moderately more important than industry and firm effects on business‐segment performance. Copyright © 2008 John Wiley & Sons, Ltd.     

Leadership succession and firm performance in an emerging economy: Successor origin,relational embeddedness,and legitimacy

We examine how leadership transition affects firm performance in emerging economies. Building upon the social embeddedness and neo‐institutional perspectives, we argue for the importance of alignment between successor origin and social context for firm performance. We suggest that as a baseline outside successors enhance firm profitability because of the large‐scale and rapid changes in emerging markets. However, this outsider premium is reduced in firms embedded in family and business group relationships, where family and inside successors can better access network resources. But the outsider premium is amplified in firms embedded in a mature market‐based logic, such as high tech or foreign invested firms, because the perceived legitimacy of outsiders facilitates resource acquisition. Our arguments are supported through the analysis of Taiwanese listed firms between 1996 and 2005. Copyright © 2012 John Wiley & Sons, Ltd.     

Management heterogeneity,competitive interaction groups,and firm performance

One of the fundamental problems in strategic management is to map a heterogeneous set of firms in an industry into subsets of firms within which firms are homogeneous in their conduct and performance. The strategic group concept provides an answer to this intriguing question. Researchers in strategic group theory argue that firms within the same strategic group are behaviorally similar and thus tend to compete more fiercely within the group than across groups. In this paper, we focus on the question whether firms within the same group show similar decision‐making characteristics. Strategic‐choice theorists argue that top management teams in firms have substantial discretion in determining the future strategic contour of firms. Upper‐echelon theorists also argue that top managers are the strategists who set the direction of firms and the pace of competition in the industry. Further, they argue that top management team characteristics are an important element that determines the market niche in which a firm competes and the strategic direction a firm follows. Based on these arguments, we expect that there will be a significant link between grouping of firms by the patterns of competitive interactions and grouping of firms by top management team heterogeneity. Moreover, we argue that the closer the TMT heterogeneity of a firm is to the dominant heterogeneity in the competitive interaction group, the better it performs. Copyright © 2000 John Wiley & Sons, Ltd.     

Undervaluation of directors in the board hierarchy: Impact on turnover of directors (and CEOs) in newly public firms

Research summary: We examine the consequences of the formalization of the board leadership structure at IPO for board‐level turnover. We introduce the concept of director undervaluation. It indicates the degree to which a director’s qualifications based on normatively accepted criteria for board leadership are not duly reflected in his/her appointments to the board chair and committee chair positions. We find that the higher the average undervaluation of directors on the board (“board undervaluation”), the greater the turnover levels of undervalued directors. This effect is stronger when board interaction frequency is higher. We contribute to the behavioral perspective on corporate governance by introducing justice‐based legitimacy as a key normative institution, and by providing a novel predictor of aggregate turnover of directors (as well as the firm’s CEO). Managerial summary: Why do outside directors exit the board? We offer a novel answer to this question in the context of newly public firms. We suggest that when directors are passed over for the board chair and committee chair positions despite having higher qualifications than their peers, they have been “undervalued,” and a negative board climate is likely to develop. We find that the higher the average undervaluation of directors on the board, the higher the turnover levels of these undervalued directors. More frequent board meetings exacerbate these turnover levels. Further, these turnover effects are not restricted to undervalued directors—even the CEO is more likely to exit. This study demonstrates the critical importance of developing a legitimate and fair board leadership structure.     

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.     

Do board chairs matter? The influence of board chairs on firm performance

Research summary : We use a variance decomposition methodology to assess the degree to which board chairs may influence their companies' performance. To isolate the board chair effect, we focus on firms in which the CEO and board chair positions are separated. Using a U.S. sample of 6,290 firm‐year observations representing 1,828 board chairs in 308 different industries, our results indicate that the board chair effect is substantial at about nine percent. Drawing on resource dependency theory, we also theorize and show how this board chair effect is contingent on the task environment in which firms operate. Our results add to the literature examining the role and influence of board chairs and the context in which chairs may have a greater impact on performance. Managerial summary : Following institutional and regulatory changes, more firms are separating the CEO and board chair positions. With an increasing number of individuals separate from the CEO serving as board chairs, a critical question becomes: What influence do these separate board chairs have on firm performance? Prior research suggests that separate board chairs can provide important resources—including advice and counsel, legitimacy, information linkages, and preferential access to external commitments and support—to their CEOs, other top managers, and overall firms. In turn, who the board chair is and the individual's ability (or lack thereof) to provide these resources may have a significant impact on firm performance. Offering support for this perspective, we find that separate board chairs explain nine percent of the variance in firm performance. Copyright © 2016 John Wiley & Sons, Ltd.     

Structure and process of diversification,compensation strategy,and firm performance

This study tests six hypotheses on the extent to which a match between compensation and diversification strategies affects firm performance. Using both archival and survey data, results generally support the notion that a firm's compensation strategies make a greater contribution to firm performance if these are attuned to extent and process of corporate diversification. The paper concludes with a set of recommendations for future research on compensation-diversification strategy relations and their interactive effect on firm performance.     

Firm,strategic group,and industry influences on performance

A long‐standing debate has focused on the extent to which different levels of analysis shape firm performance. The strategic group level has been largely excluded from this inquiry, despite evidence that group membership matters. In this study, we use hierarchical linear modeling to simultaneously estimate firm‐, strategic group‐, and industry‐level influences on short‐term and long‐term measures of performance. We assess the three levels' explanatory power using a sample of 1,165 firms in 12 industries with data from a 7‐year period. To enhance comparability to previous research, we also estimate the effects using the variance components and ANOVA methods relied on in past studies. To assess the robustness of strategic group effects, we examine both deductively and inductively defined groups. We found that all three levels are significantly associated with performance. The firm effect is the strongest, while the strategic group effect rivals and for some measures outweighs the industry effect. We also found that the levels have varying effects in relation to different performance measures, suggesting more complex relationships than depicted in previous studies. Copyright © 2007 John Wiley & Sons, Ltd.     

Market orientation,marketing capabilities,and firm performance

Drawing on traditional resource‐based theory and its recent dynamic capabilities theory extensions, we examine both the possession of a market orientation and the marketing capabilities through which resources are deployed into the marketplace as drivers of firm performance in a cross‐industry sample. Our findings indicate that market orientation and marketing capabilities are complementary assets that contribute to superior firm performance. We also find that market orientation has a direct effect on firms' return on assets (ROA), and that marketing capabilities directly impact both ROA and perceived firm performance. Copyright © 2009 John Wiley & Sons, Ltd.     

Being the CEO's boss: An examination of board chair orientations

Research summary: Scholars have traditionally conceptualized board leadership as a dichotomous construct. A combined CEO and board chair position is interpreted as reflecting a more collaborative approach to corporate governance, whereas separate positions are interpreted as ensuring greater board control. I challenge this conceptualization and posit that a separate board chair can be oriented toward collaboration as well as—or in place of—control. I analyze newly available data from corporate proxy statements to identify these two board chair orientations and test competing perspectives on how they impact profitability growth in a sample of S&P 500 firms. The results indicate that board leadership is a more nuanced phenomenon than the extant literature would suggest . Managerial summary: What is the role of the board chair when not the CEO ? Corporate governance experts assert the board chair's role is to monitor and control the CEO . Yet, board chairs often play another, more collaborative role. Board chairs frequently provide advice and guidance to CEOs and relieve CEOs of board leadership burdens, enabling the CEOs to focus on their primary responsibilities. In this study, I examine the effect of board chair orientations on financial performance and find that, as with separating or joining the CEO and board chair positions, the profitability implications of the selected orientation are far from universal. Board chairs must consider their firm's performance context in order to get the most out of a particular approach to being the CEO 's boss . Copyright © 2016 John Wiley & Sons, Ltd.     

How do interdependencies among human‐capital deployment,development, and diversification strategies affect firms' financial performance?

Using key insights from the resource‐based view of the firm, we develop and test a theory of how firms can successfully deploy and develop their strategic human assets while managing the trade‐offs in their service and geographical diversification strategies. In a sample of large law firms we find that, even though firms profit from expert human‐capital leveraging strategy and service and geographical diversification strategies individually, pursuing these strategies simultaneously at high levels produces negative interaction effects on firm profitability. In addition, the internally developed, firm‐specific associate human capital strategically fits better with high levels of expert human‐capital leveraging. While lateral hiring helps firms build new knowledge bases and take advantage of growth opportunities, pursuing high levels of both expert human‐capital leveraging and lateral hiring of associates results in lower profitability. To fully capture the economic benefits from strategies of diversification, human‐capital leveraging and lateral hiring, firms should understand and manage the complex interdependencies among multiple levels of strategy. Copyright © 2005 John Wiley & Sons, Ltd.