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1 – 10 of over 9000Chih-Wei Peng and She-Chih Chiu
The purpose of this paper is to investigate the effects of chief executive officer (CEO) international work experience, functional background and career concerns on…
Abstract
Purpose
The purpose of this paper is to investigate the effects of chief executive officer (CEO) international work experience, functional background and career concerns on managerially-distorted investment decisions.
Design/methodology/approach
This paper focuses on S&P 500 publicly held US manufacturing companies during the period from 2009 to 2012. The data related to the CEOs’ international experience and their functional background experience are manually collected from Business Week’s Corporate Elite. Financial data is retrieved from COMPUSTAT database. The data for CEO tenure and age are retrieved from the ExecuComp database. Besides ordinary least squares regression, this paper conducts two-stage least squares regression analysis. Endogeneity and additional tests are also considered in this paper.
Findings
The findings show that CEO international work experience may not reduce under-investment, but it may exacerbate over-investment. CEO throughput functional background may exacerbate under-investment, but it may not reduce over-investment. Furthermore, CEO career concerns are useful in reducing the inefficient investments caused by international work experience and throughput functional background. These results remain similar when potential self-selection bias, as well as alternative measures of career concerns and investment efficiency, are considered.
Originality/value
This paper contributes to the existing literature in the following ways: first, while a significant amount of attention has been paid to how investment decisions are affected by financial reporting quality and material internal control weaknesses, there has been little evidence accumulated related to how managers’ international experience, professional background and career concerns affect investment inefficiency. The authors attempt to fill this gap. Second, the authors manually collect the international experience and functional backgrounds of CEOs working for S&P 500 US manufacturing companies. This unique data set makes it possible to complement previous studies by investigating the effects of managerial international experience and functional background on investment behavior. Finally, previous theoretical studies have long recognized that managers’ career concerns affect their corporate investment decisions. These studies suggest that young CEOs have a greater incentive to signal their abilities by adopting more active and possibly riskier investment strategies, thus raising the moral hazard problem with regard to firm investments. The authors enrich these studies by showing that work experience alleviates the moral hazard problem with respect to young CEOs’ investment decisions.
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Elio Alfonso, Li-Zheng Brooks, Andrey Simonov and Joseph H. Zhang
The purpose of this paper is to examine the impact of career concerns on CEOs’ use of expectations management to meet or beat analysts’ quarterly earnings forecasts. The authors…
Abstract
Purpose
The purpose of this paper is to examine the impact of career concerns on CEOs’ use of expectations management to meet or beat analysts’ quarterly earnings forecasts. The authors posit that early career-stage CEOs are less (more) likely to use expectations management than are late career-stage CEOs if the market views expectations management as an opportunistic strategy (efficient process) due to reputational capital concerns.
Design/methodology/approach
The authors obtain data for CEO career stages and CEO compensation from ExecuComp, analyst earnings forecasts from the detailed I/B/E/S database, financial statement data from quarterly Compustat and stock returns from the daily CRSP database over the period 1992–2013.
Findings
The results are consistent with the opportunistic hypothesis and early-stage CEOs seeking to build reputational capital by avoiding the perception of engaging in an inefficient managerial strategy. The authors find robust evidence that late career-stage CEOs are more likely to engage in expectations management than early career-stage CEOs. Furthermore, the authors show that late career-stage CEOs tend to employ expectations management to boost the value of their equity-based compensation.
Research limitations/implications
The findings have important implications because the authors document a different implication of the “horizon problem” related to CEOs’ opportunistic forecasting behavior and the manipulation of analysts’ forecasts for CEOs who are approaching retirement.
Practical implications
The results have practical implications for analysts who provide earnings forecasts for firms whose CEOs are in early or late career stages and for investors who use such analysts’ forecasts in firm valuation models.
Originality/value
The authors contribute to the literature on expectations management by documenting how reputational incentives of CEOs affect the likelihood that managers engage in expectations management. The authors show that an important managerial incentive to engage in expectations management is CEO career concerns. Furthermore, the authors show that CEOs who are in early stages of their careers choose not to engage in expectations management due to the market’s perceived degree of opportunism pertaining to this strategy.
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The purpose of this paper is to investigate the effect of long horizon institutional ownership on CEO career concerns to meet the short-term earnings benchmark.
Abstract
Purpose
The purpose of this paper is to investigate the effect of long horizon institutional ownership on CEO career concerns to meet the short-term earnings benchmark.
Design/methodology/approach
Using a sample of 10,565 firm-year observations in the USA, the paper examines the extent to which long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast.
Findings
After controlling for the general performance-turnover relation, this paper finds that long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. This finding is stronger when CEOs focus on long-term value creation and do not sacrifice long-term value to boost current earnings and is stronger when the monitoring intensity by long horizon institutional investors is greater.
Research limitations/implications
The results suggest that long horizon institutional investors serve a monitoring role in alleviating CEO career concerns to meet the short-term earnings benchmark.
Originality/value
This paper contributes to the literature on the relation between long horizon institutional ownership and attenuated managerial short-termism. The literature is silent about why long horizon institutional investors alleviate managerial short-termism. This paper fills this void in the literature by documenting that long horizon institutional investors mitigate CEO career concerns for managerial short-termism. Moreover, this paper contributes to the literature on the monitoring role of institutional investors by documenting the incremental effect of institutional ownership on CEO career concerns to meet the short-term earnings benchmark.
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Bill B. Francis, Iftekhar Hasan and Gokhan Yilmaz
This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and efficiency…
Abstract
This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and efficiency. Using exogenous CEO departures as a natural experiment, it establishes a causal link between managerial capability and innovation. Importantly, it reveals that firms with talented managers receive significantly more nonself citations; make significantly lower self-citations and lesser citations to the others, indicating novel and explorative innovation achievements. Also, managers with higher general (specialized) ability are cited more (less) by patents from a wider range of fields. Lastly, career concern is identified as a mechanism linking higher ability and innovation.
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Lee M. Dunham, Tirimba Obonyo and Sijing Wei
The purpose of this paper is to determine if Chief Executive Officers (CEOs) are rewarded or punished in the corporate director labor market for engaging in corporate social…
Abstract
Purpose
The purpose of this paper is to determine if Chief Executive Officers (CEOs) are rewarded or punished in the corporate director labor market for engaging in corporate social responsibility (CSR) activities.
Design/methodology/approach
The authors empirically examine the relation between CEOs' CSR engagement and their corporate board appointments in retirement using logit, ordinary least squares (OLS) and Poisson regression models.
Findings
Results indicate that CSR engagement has significant director labor market consequences for retiring CEOs. Specifically, CSR engagement has a favorable impact on the ability of retired CEOs to obtain board seats and board seats at larger firms generally associated with higher pay, even after controlling for firm performance and other determinants previously documented to explain director selection. The authors also find evidence that CEOs of firms with high CSR engagement build up their firms' CSR scores over time as they approach retirement, which is consistent with the labor market for directors providing incentives to attract CEOs to board service in retirement.
Originality/value
By examining the relationship between a CEO's CSR engagement and their external corporate board directorships, this paper advances the understanding of the determinants of corporate board appointments. Further, while most prior research assesses the value of CSR engagement by looking at the relation between CSR engagement and that firm's performance, this is the first study to our knowledge to look outside the firm to determine if CSR engagement has value to the CEO.
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Conrado Diego García-Gómez, Marina Zavertiaeva and Félix J. López Iturriaga
This paper aims to study the impact of CEOs’ personality and social connections on corporate risk-taking in the Russian market.
Abstract
Purpose
This paper aims to study the impact of CEOs’ personality and social connections on corporate risk-taking in the Russian market.
Design/methodology/approach
Using a sample of 93 large listed Russian corporations between 2008 and 2016, this study tests a range of personal traits, including the classical personal characteristics like age and tenure, some country-specific traits such as connections and military experience, as well as other human and social capital characteristics.
Findings
This study finds non-linear relationships between corporate risk-taking and CEO age and tenure. This study also finds that firms run by CEOs with military experience take more corporate risk. On the CEOs’ social capital side, this study’s results suggest that both political and educational connections are positively related to corporate risk-taking.
Originality/value
This study also tests some traits that have usually been ignored by the literature, such as marital and family status.
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Saif-Ur-Rehman, Khaled Hussainey and Hashim Khan
The authors examine the spillover effects of CEO removal on the corporate financial policies of competing firms among S&P 1500 firms.
Abstract
Purpose
The authors examine the spillover effects of CEO removal on the corporate financial policies of competing firms among S&P 1500 firms.
Design/methodology/approach
The authors used generalized estimating equations (GEE) on a sample of S&P 1,500 firms from 2000 to 2018 to test this study's research hypotheses. Return on assets (ROA), investment policy, and payout policy are used as proxies for corporate policies.
Findings
The authors found an increase in ROA and dividend payout in the immediate aftermath. Further, this study's hypothesis does not hold for R&D expenditure and net-working capital as the authors found an insignificant change in them in the immediate aftermath. However, the authors found a significant reduction in capital expenditure, supporting this study's hypothesis in the context of investment policy. Institutional investors and product similarity moderated the spillover effect on corporate policies (ROA, dividend payout, and capital expenditure).
Originality/value
The authors address a novel aspect of CEO performance-induced removal due to poor performance, i.e., the response of other CEOs to CEO performance-induced removal. This study's findings add to the literature supporting the bright side of CEOs' response to CEO performance-induced removal in peer firms due to poor performance.
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Feng Xie, Hamish D. Anderson, Jing Chi and Jing Liao
This paper examines the impact of state control on stock price crash risk given whether and how ownership structure affects stock price crash risk is relatively underexplored.
Abstract
Purpose
This paper examines the impact of state control on stock price crash risk given whether and how ownership structure affects stock price crash risk is relatively underexplored.
Design/methodology/approach
The sample includes 2,285 Chinese firms listed in the Shanghai and Shenzhen Stock Exchanges. Panel data is used for conducting the analysis and endogeneity is addressed with instrumental variable estimation and by testing how stock price crash risk is affected when the ultimate controller changes from a private-owned company to a state-owned enterprise.
Findings
The authors find that state control is negatively associated with future stock price crash risk. The mechanism analysis shows that state control reduces stock price crash risk through the implementation of conservative corporate policies. Furthermore, the impact of state control is more pronounced with more intensive state involvement, e.g. in strategic industries and when a company's ultimate controller is a non-corporate government agency or the central government.
Originality/value
This paper enriches the literature on the controversy of the role of state control and the results of this study highlight the importance of the conservatism of state control on reducing stock return tail risk. The authors also add to the literature on the importance of the policy-risk sharing effect of state ownership.
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This study aims to investigate the impact of top management team (TMT)'s gender diversity on corporate social performance (CSP). It sheds light on inconsistent results in…
Abstract
Purpose
This study aims to investigate the impact of top management team (TMT)'s gender diversity on corporate social performance (CSP). It sheds light on inconsistent results in literature by testing the moderator effects of chief executive officer (CEO) managerial ability and corporate governance (CG) on such impact.
Design/methodology/approach
A dynamic panel estimator is applied to an international sample of 8640 firm‐year observations from 2013 to 2017.
Findings
The author finds reliable evidence that the critical mass of at least three women leaders has a positive impact on the firm's CSP. Obtained results suggest, moreover, the deterrence effects of CEO managerial ability and CG tools (board independence, board gender diversity, the presence of a corporate social responsibility committee and family control) on the women leaders' contribution to the firm's CSP level. These results remain consistent with alternative measures for women leaders and CEO managerial ability. However, findings are lost when women achieve the CEO position, the chairperson position or both positions, which imply that men and women leadership styles are closely similar rather than different. Furthermore, women leaders' effect on CSP seems dependent (do not) on the country (industry) which a firm belongs to.
Practical implications
From a practical standpoint, the study highlights the importance of fostering the achievement of a critical mass of women leaders and the combination of CEO managerial ability – educational/professional backgrounds – and CG attributes to improve the firm's CSP. The study has important implications for investors and regulators. If investors wish to increase CSP, they should ask for more gender diversified TMTs. Furthermore, this study supports regulators in their efforts to increase senior women's quotas by providing empirical evidence of better social outcomes under leader gender diversity. The study’s evidence is also useful for companies in setting the criteria to identify CEOs who can support their strategic decisions.
Originality/value
By studying the impact female leaders have on CSP under CEO managerial ability and CG as moderators, this study is the first to display complementarities and substitutions between CEO's managerial ability and selected CG attributes in the promotion of CSP by female senior executives. Furthermore, it fills the void on how TMT's gender diversity impact CSP. In fact, while it is conventionally considered that women are more likely to engage in socially responsible activities, sensitive findings of this study shed light on the brighter side of female executives when they achieve the CEO, the chairperson position or both positions.
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Muhammad Akram Naseem, Jun Lin, Ramiz ur Rehman, Muhammad Ishfaq Ahmad and Rizwan Ali
The purpose of this paper is to empirically capture the impact of a chief executive officer’s (CEO) personal and organizational characteristics on firm performance in the context…
Abstract
Purpose
The purpose of this paper is to empirically capture the impact of a chief executive officer’s (CEO) personal and organizational characteristics on firm performance in the context of a developing country and to explore whether capital structure mediates the relationship between CEO characteristics and firm performance.
Design/methodology/approach
In order to test the hypothesized model, CEO duality, tenure and personal characteristics (age, gender and education) were taken as explanatory variables to study their impact on firm performance. Data were collected from 179 Pakistani companies from 2009–2015. The collected data were processed via panel data regression analysis under fixed effect assumptions.
Findings
Results show that CEO duality has a negative impact on firm performance and that a CEO with a dual role is more inclined toward debt financing. Moreover, a CEO with a longer tenure tends to be opportunistic and prioritize his/her personal interest while making strategic financial decisions, thus creating agency costs for the firm. Furthermore, CEO characteristics like age, gender and education have significant effects on firm financial decisions and firm performance. Finally, the debt and equity ratio partially mediates the link between CEO characteristics and firm performance.
Research limitations/implications
The findings of this study have limited generalizability due to the specific nature of the sample characteristics.
Originality/value
To the best of the authors knowledge, this study is the first to explore the impact of CEO characteristics on capital structure and firm performance. This work is also the first to explore the mediating role of capital structure in the relationship between CEO characteristics and firm performance by using Pakistani data.
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