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Article
Publication date: 8 January 2024

Ahmed Bouteska, Taimur Sharif and Mohammad Zoynul Abedin

Given the serious question raised by the subprime of the 2008 global financial crisis over the rising practices of excessive rewarding of executives in the USA and European firms…

Abstract

Purpose

Given the serious question raised by the subprime of the 2008 global financial crisis over the rising practices of excessive rewarding of executives in the USA and European firms, the executive pay-performance nexus has emerged as a popular topic of debate in the contemporary corporate finance research. Conducted mostly on the Anglo-Saxon contexts, research outcomes have been inconclusive and dichotomous. Considering this backdrop, this study aims to investigate the endogenous relationship between executive compensation and risk taking in the context of the USA.

Design/methodology/approach

Using a large sample of non-financial firms from 2010 to 2020 based on panel data and two-stage least square regression. In this study, the riskier corporate decision is measured as book leverage and ratio of R&D expense to total assets. Chief executive officers’ (CEO) experience and age are used as instrumental variables, and these are expected to influence compensation incentives and, hence, affect firm riskiness indirectly. Firm size, return on assets and CEO turnover are reported to affect compensation and corporate decisions, therefore, included as control variables. Given that higher executive compensation is related to riskier corporate decision in firms, this study incorporates total wealth (i.e. accumulated equity related compensation) as an additional proxy of compensation, and this selection is justifiable by the perfect contracting notion of the agency theory.

Findings

The results of this study show a significant positive and increasing nexus among compensation and riskier corporate decisions. Besides, the compensation level proxied through the percentage of each form of compensation in total compensation is very important as greater equity and greater salary diminishes risk taking.

Practical implications

The outcomes of this study have useful implications for firm stakeholders and policymakers.

Originality/value

The level of pay measured by the percentage of each type of compensation in total compensation is of utmost importance as it can increase or decrease risk taking in corporate decisions.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 6 March 2024

Patti P. Phillips and Jack J. Phillips

In the field of leadership development, a dilemma exists with many executives, who often support and fund leadership development programs. Executives know that great leaders are…

Abstract

Purpose

In the field of leadership development, a dilemma exists with many executives, who often support and fund leadership development programs. Executives know that great leaders are needed to drive results, and for the most part, they must develop those leaders internally. At the same time, the leadership development providers are content with showing executives that they have changed leader behavior. The same providers are reluctant to connect behavior change to meaningful and important business measures. Yet, when used properly, leader behavior will drive all types of important impact measures in an organization. That is what executives want to see. This purpose of this article is to show how leadership development providers can connect their programs to important business measures and deliver value at the Impact and ROI Levels using the ROI Methodology.

Design/methodology/approach

Executives prefer to have leader behavior connected to impact, which is their No. 1 measure and return on investment (ROI), their No. 2 measure. Impact and ROI is the world they live in. Executives know that new leader behavior is necessary for impact and often have input into the behaviors they would like to see. When it comes to measuring success, they want to see how the program connects to the organization and the value the new behavior delivers. To avoid the possibility of disappointing results, implement the ROI Methodology framework to design the leadership development program to deliver the desired results and make sure that everyone involved is helping to deliver the needed success.

Findings

Leadership development providers must address the challenge of showing the value of leadership development. It is not that difficult to show the impact and ROI of major programs. Literally, hundreds of organizations are doing this now. The authors have published four books with different publishers on the value of leadership development, with case studies, and more will be published.

Originality/value

This level of evaluation can set the leadership development program apart from the others.

Details

Strategic HR Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1475-4398

Keywords

Article
Publication date: 22 May 2023

Yun Shen, Vito Mollica and Aldo Fortunato Dalla Costa

This study sheds new light on the personality trait and provides evidence regarding the relation between narcissism and desirable accounting practices, specifically the impact of…

Abstract

Purpose

This study sheds new light on the personality trait and provides evidence regarding the relation between narcissism and desirable accounting practices, specifically the impact of CEO narcissism on accounting conservatism.

Design/methodology/approach

The authors test the relation between CEO narcissism and accounting conservatism for a sample of 907 US companies and their corresponding CEOs for the period between 2010 and 2018. The authors apply three established models of accounting conservatism and measure executives' narcissism using a non-intrusive approach ubiquitous in the literature.

Findings

The authors find that CEO narcissism is associated with speculative accounting practices in the form of timely recognition of positive news and more prudent financial reporting of anticipated negative news. The authors provide the first empirical evidence that, despite its well-known negative effects on corporate financial reporting, executive narcissism can also produce positive outcomes.

Originality/value

While managerial overconfidence has received much attention, the effects of executives' narcissism are still widely unexplored (Chatterjee and Hambrick, 2007). The authors thus contribute to the literature by investigating the relationship between CEOs' narcissism and accounting conservatism. The authors conjecture CEO narcissism should have a twofold effect on prudent financial reporting. On the one hand, CEOs' narcissism should be associated with low levels of unconditional conservatism due to excessively fast good news recognition. On the other hand, narcissistic executives should be associated with early recognition of negative news and hence with higher levels of conditional conservatism.

Details

Journal of Accounting Literature, vol. 46 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 8 February 2024

Da Teng, Moustafa Salman Haj Youssef and Chengchun Li

This paper builds upon managerial discretion literature to study the relationship between foreign ownership and bribery intensity.

Abstract

Purpose

This paper builds upon managerial discretion literature to study the relationship between foreign ownership and bribery intensity.

Design/methodology/approach

Building on World Bank’s data of 9,386 firms from 125 countries over the period 2006–2018, this paper uses Tobit regression, ordered probit and logit models to empirically test the hypotheses.

Findings

This paper finds that firms have higher bribery intensity when executives have a higher level of managerial discretion. Smaller firms with slack financial resources tend to bribe more when they face more government intervention, munificent and uncertain industrial environment.

Originality/value

Extant corruption literature has addressed the effects of external institutional settings and internal corporate governance on bribery offering among multinational enterprises (MNEs). How much, and under what condition do top executives matter in bribery activities are yet to be answered. This paper integrates the concept of managerial discretion with corruption and bribery literature and offers a potential answer to the above question. In addition, prior corruption and bribery literature have primarily studied bribery through either micro- or macro-level analysis. This paper adopts multiple-level of analyses and elucidates the foreign ownership and bribery relationship from the organizational and industrial levels.

Details

Cross Cultural & Strategic Management, vol. 31 no. 1
Type: Research Article
ISSN: 2059-5794

Keywords

Article
Publication date: 26 July 2023

Michael T. Geier

The purpose of the article was to identify the core dimensions of strategic thinking and create a measure that provides a comprehensive operationalization of the construct.

Abstract

Purpose

The purpose of the article was to identify the core dimensions of strategic thinking and create a measure that provides a comprehensive operationalization of the construct.

Design/methodology/approach

The construct validity of the measure was assessed in two studies using four samples with a total of 985 participants. The measure was created using a multi-step process that included item development and content validation, exploratory and confirmatory factor analysis, convergent and discriminant validity, criterion validity and test-retest validity.

Findings

The exploratory factor analysis (EFA) supported the existence of the three dimensions of strategic thinking (visionary, synthetic and creative thinking) as conceptually proposed. The measure was reduced to nine items. The confirmatory factor analysis (CFA) confirmed the three dimensions and revealed acceptable factor loadings and model fit. Convergent, discriminant and criterion validity were established, and the measure demonstrated acceptable test-retest reliability.

Originality/value

An individual's ability to think strategically is vital for making strategic decisions and relevant to upper echelon theory and strategic management. The definition and core dimensions of strategic thinking are unclear in the literature, creating confusion. This study added to the literature by defining the core dimensions of strategic thinking and developing the strategic thinking assessment (STA) to measure the construct.

Details

Journal of Strategy and Management, vol. 17 no. 1
Type: Research Article
ISSN: 1755-425X

Keywords

Article
Publication date: 18 January 2024

Maha Khemakhem Jardak, Marwa Sallemi and Salah Ben Hamad

Remuneration policies may differ from country to country, and their effect on bank stability could be due to the legal framework. Therefore, this study aims to investigate how the…

Abstract

Purpose

Remuneration policies may differ from country to country, and their effect on bank stability could be due to the legal framework. Therefore, this study aims to investigate how the legal system impacts the relationship between CEO compensation and bank stability across countries.

Design/methodology/approach

To test the study hypotheses, the authors use panel data of 74 banks operating in ten OECD countries during the period 2009–2016 and apply the generalized moments method regression model to better remediate the endogeneity problem.

Findings

The findings confirm that a country’s banking regulations significantly affect its bank stability. Common law countries have less bank stability than civil law countries. This result can be interpreted by the fact that, in common-law countries, banks’ CEO are strongly protected by the law, so they allocate a large part of bank assets to risky loans to improve their variable remuneration.

Practical implications

The research can help policymakers understand bank stability in one country. Any legal reform would require prior knowledge of how risk-taking may arise in executive compensation.

Originality/value

The contribution is to explain the controversial effect of executive compensation on bank stability in the framework of legal theory. The authors argue that regulators should monitor compensation structures and that the country’s legal origin of law shapes the CEO compensation structure and is a determinant of bank stability. To the best of the authors’ knowledge, there are no studies exploring this field. So, this study tries to shed more light on the dark side of CEOs’ behavior when undertaking risky projects to maximize their remuneration.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 29 February 2024

Jingxin Lv and Shiquan Wang

This study aims to focus on the resource-based faultline of a top management team (TMT) and intends to investigate the impact of TMT resource-based faultline on corporate green…

Abstract

Purpose

This study aims to focus on the resource-based faultline of a top management team (TMT) and intends to investigate the impact of TMT resource-based faultline on corporate green innovation, by indicating the environmental management as a mediator and slack resources as a moderator to understand the relationship.

Design/methodology/approach

Based on the empirical data of Chinese listed manufacturing companies from 2008 to 2020, this study assesses the hypotheses using an OLS model with fixed effects of time and industry.

Findings

The results indicate that TMT resource-based faultline is significantly negatively correlated with corporate green innovation. The conclusion remains valid after endogeneity tests and robustness checks. Mechanism test shows that environmental management plays a mediating role in the association between TMT resource-based faultline and corporate green innovation. Moreover, slack resources diminish the negative association between TMT resource-based faultline and corporate green innovation.

Originality/value

The study not only expands the theoretical understanding of the deeper motivation of TMT faultline on corporate green innovation, but also provides a practical reference for optimizing the human resource allocation of the TMT and accelerating green transformation development.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 24 July 2023

Xiaoyu Yang, Longzhu Dong and Abraham Nahm

This study aims to examine how business executives' political connections are associated with government subsidies and strategic change, and how they, in turn, influence firm…

Abstract

Purpose

This study aims to examine how business executives' political connections are associated with government subsidies and strategic change, and how they, in turn, influence firm performance, measured by return on assets (ROA) and market share.

Design/methodology/approach

Hypotheses were tested using the large firm-level dataset provided by the National Bureau of Statistics (NBS) of China for the period 2003–2013. This is one of the most comprehensive datasets of Chinese manufacturing companies and includes 321,722 firms on average per year, which spans over 37 industries.

Findings

The authors found that political connections, measured by senior executives' membership in the National People's Congress of China (NPC), were positively associated with government subsidies but were not associated with strategic change. Also, government subsidies, as the underlying mechanism, mediated the relationships between NPC membership and firm performance but strategic change did not.

Research limitations/implications

By examining the possible mediators between corporate political strategies and firm performance, the authors confirmed the thought that the impact of political connections on firm performance is a complex phenomenon and goes beyond a simple direct effect. However, future research could explore other mediators in this relationship.

Originality/value

While the direct relationship between political connections and firm performance has been examined in management literature, the results are mixed. For the first time, the authors addressed the gap and opened the “black box” – the underlying mechanisms of this relationship. This study's findings contribute to the literature on corporate political activity, strategic change, and their influences on firm performance.

Details

Journal of Strategy and Management, vol. 17 no. 1
Type: Research Article
ISSN: 1755-425X

Keywords

Open Access
Article
Publication date: 13 February 2024

Luigi Nasta, Barbara Sveva Magnanelli and Mirella Ciaburri

Based on stakeholder, agency and institutional theory, this study aims to examine the role of institutional ownership in the relationship between environmental, social and…

Abstract

Purpose

Based on stakeholder, agency and institutional theory, this study aims to examine the role of institutional ownership in the relationship between environmental, social and governance practices and CEO compensation.

Design/methodology/approach

Utilizing a fixed-effect panel regression analysis, this research utilized a panel data approach, analyzing data spanning from 2014 to 2021, focusing on US companies listed on the S&P500 stock market index. The dataset encompassed 219 companies, leading to a total of 1,533 observations.

Findings

The analysis identified that environmental scores significantly impact CEO equity-linked compensation, unlike social and governance scores. Additionally, it was found that institutional ownership acts as a moderating factor in the relationship between the environmental score and CEO equity-linked compensation, as well as the association between the social score and CEO equity-linked compensation. Interestingly, the direction of these moderating effects varied between the two relationships, suggesting a nuanced role of institutional ownership.

Originality/value

This research makes a unique contribution to the field of corporate governance by exploring the relatively understudied area of institutional ownership's influence on the ESG practices–CEO compensation nexus.

Article
Publication date: 27 June 2023

Paolo Saona, Laura Muro, Pablo San Martín and Ryan McWay

This study aims to investigate how gender diversity and remuneration of boards of directors’ influence earnings quality for Spanish-listed firms.

Abstract

Purpose

This study aims to investigate how gender diversity and remuneration of boards of directors’ influence earnings quality for Spanish-listed firms.

Design/methodology/approach

The sample includes 105 nonfinancial Spanish firms from 2013 to 2018, corresponding to an unbalanced panel of 491 firm-year observations. The primary empirical method uses a Tobit semiparametric estimator with firm- and industry-level fixed effects and an innovative set of measures for earnings quality developed by StarMine.

Findings

Results exhibit a positive correlation between increased gender diversity and a firm’s earnings quality, suggesting that a gender-balanced board of directors is associated with more transparent financial reporting and informative earnings. We also find a nonmonotonic, concave relationship between board remuneration and earnings quality. This indicates that beyond a certain point, excessive board compensation leads to more opportunistic manipulation of financial reporting with subsequent degradation of earnings quality.

Research limitations/implications

This study only covers nonfinancial Spanish listed firms and is silent about how alternative board features’ influence earnings quality and their informativeness.

Originality/value

This study introduces measures of earnings quality developed by StarMine that have not been used in the empirical literature before as well as measures of board gender diversity applied to a suitable Tobit semiparametric estimator for fixed effects that improves the precision of results. In addition, while most of the literature focuses on Anglo-Saxon countries, this study discusses board gender diversity and board remuneration in the underexplored context of Spain. Moreover, the hand-collected data set comprising financial reports provides previously untested board features as well as a nonlinear relationship between remuneration and earnings quality that has not been thoroughly discussed before.

Details

Gender in Management: An International Journal , vol. 39 no. 1
Type: Research Article
ISSN: 1754-2413

Keywords

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