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This paper aims to demonstrate the efforts of Hay Youssef and Tang (2019) to reaffirm the importance of managerial discretion is unsuccessful.
Abstract
Purpose
This paper aims to demonstrate the efforts of Hay Youssef and Tang (2019) to reaffirm the importance of managerial discretion is unsuccessful.
Design/methodology/approach
Theoretical frameworks from traditional and recent literature on the concept of managerial discretion are related to corporate governance scholarship.
Findings
There are in fact no studies on managerial discretion based on explicit theoretical and empirical definitions and thus no studies published which have measured the degrees of managers’ discretion. The conclusion is that the inability to define the notion of managerial discretion is tantamount to the inability to research it.
Practical implications
Research on managerial discretion does not provide any advice to owners and directors of boards on granting top executives a high or a low degree of discretion.
Originality/value
This paper reaffirms the conclusion of Andersen (2017) that corporate governance scholarship will improve if it abandons the concept of managerial discretion.
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Moustafa Salman Haj Youssef, Hiba Maher Hussein and Hoda Awada
The purpose of this paper is to examine cross-cultural differences in managerial discretion and the extent to which variations and interaction of cultural practices and values…
Abstract
Purpose
The purpose of this paper is to examine cross-cultural differences in managerial discretion and the extent to which variations and interaction of cultural practices and values affect the degree of freedom in decision making that is accorded to executives. This paper offers a holistic approach to investigating culture in addition to acknowledging its paradoxical nature.
Design/methodology/approach
Using a panel of prominent management consultants to rate discretion across 18 countries, the authors further develop the national-level construct of managerial discretion by empirically investigating the influence of cultural practices and values on CEOs’ discretion.
Findings
The study reveals that cultural values moderate the relationship between cultural practices and managerial discretion for three cultural dimensions: individualism, uncertainty tolerance and power distance (PD). By adopting the logic of marginal utility, the authors also show that the more a society values individualism, uncertainty tolerance and PD, the weaker the effect of their practices on managerial discretion.
Originality/value
Few research has attempted to assess both cultural values and practices in relation to managerial discretion. By showing the mechanism in which culture affects the level of managerial discretion, the authors offer new theoretical insights and practical implications, overall contributing to the field of cross-cultural and strategic management. Finally, this will offer CEO’s a new perspective of leveraging culture as a tool, enhancing their decision-making capabilities in the aim of improving organizational performance.
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Moustafa Salman Haj Youssef and Da Teng
The purpose of this study is to refute the work of Andersen (2017) by suggesting a different theoretical view and to argue that the concept of managerial discretion is one of the…
Abstract
Purpose
The purpose of this study is to refute the work of Andersen (2017) by suggesting a different theoretical view and to argue that the concept of managerial discretion is one of the core dimensions that cannot be discarded when studying corporate governance.
Design/methodology/approach
This paper uses theoretical frameworks from recent literature, definitions and empirical studies on the concept of managerial discretion and corporate governance.
Findings
Several studies have empirically tested and measured the concept of managerial discretion, some have provided validity and reliability of the concept and others have showed the direct impact of discretion on firm performance.
Practical implications
Research on managerial discretion provides owners and board of directors a clear advice on how much discretion can be granted to top executives by taking into consideration the different dimensions of the external and internal environment.
Originality/value
This paper concludes that corporate governance research will not improve if it abandons the concept of managerial discretion.
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Moustafa Salman Haj Youssef, Hiba Maher Hussein and Ioannis Christodoulou
The purpose of this paper is to examine the national-level predictors of country competitiveness using the concept of managerial discretion. The objective is to empirically link…
Abstract
Purpose
The purpose of this paper is to examine the national-level predictors of country competitiveness using the concept of managerial discretion. The objective is to empirically link the strategic management discipline particularly the upper echelon theory to the concept of country performance measured by competitiveness.
Design/methodology/approach
This paper tests the proposed relationship between managerial discretion and country competitiveness using a sample of 18 countries from 6 different regional clusters. Discretion scores are generated from survey responses of prominent senior management consultants, while country competitiveness is measured via the Global Competitiveness Index developed by the World Economic Forum. A multi-level regression analysis on the panel data set spanning 10 years of national competitiveness levels is used to empirically demonstrate the association between managerial discretion and country competitiveness.
Findings
The authors show that managerial discretion is a direct predictor of national competitiveness through its ability to provide CEOs with a wider array of actions to innovate and enhance firm performance which will ultimately contribute to country competitiveness.
Practical implications
The positive influence of managerial discretion on country competitiveness provide an interesting framework to examine the influence of firms over public policy-making. Additionally, with businesses becoming increasingly globalized, the profile of countries becomes of a great importance and can become a tool for corporate strategic decisions, such as: market entry strategies.
Originality/value
By linking the well-known term of competitiveness to the concept of managerial discretion, the authors provide a totally new approach to assess country performance. Additionally, this paper contributes to the growing literature of managerial discretion by discovering new national-level consequences.
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This paper aims to assess the concept of managerial discretion with respect to its theoretical and empirical usefulness for corporate governance research.
Abstract
Purpose
This paper aims to assess the concept of managerial discretion with respect to its theoretical and empirical usefulness for corporate governance research.
Design/methodology/approach
This paper scrutinises applied theoretical claims, definitions and methods, as well as a number of empirical studies on managerial discretion.
Findings
To date, no empirical definition of the concept has been presented and no measurement has been developed and tested for reliability and validity that contains all three factors of the managerial discretion concept, as proposed by Hambrick and Finkelstein (1987).
Practical implications
Research on managerial discretion does not provide owners and directors of boards with any advice on granting top managers a high or low degree of discretion.
Originality/value
This paper concludes that corporate governance scholarship will improve if it abandons the concept of managerial discretion.
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Moustafa Salman Haj Youssef and Ioannis Christodoulou
The purpose of this paper is to broaden the national-level construct of managerial discretion and to investigate the effect of cultural practices on executive discretion.
Abstract
Purpose
The purpose of this paper is to broaden the national-level construct of managerial discretion and to investigate the effect of cultural practices on executive discretion.
Design/methodology/approach
Based on a sample of six Arabian countries and using a panel of prominent cross-cultural scholars who provided 262 discretion scores for the sample countries, the authors replicate and extend the national framework of Crossland and Hambrick (2011) in a new cultural context. The cultural dimensions were measured using survey responses of middle managers based on House et al.’s (2004) cultural practices scale.
Findings
The authors extend the national-level framework of managerial discretion and find that an encompassing array of cultural practices plays a crucial role in shaping the degree of discretion provided to CEOs. The authors empirically demonstrate that power distance, future and performance orientation, along with gender egalitarianism and assertiveness have positive relationships with managerial discretion. However, institutional collectivism, uncertainty avoidance and humane orientation negatively affect the degree of discretion provided to CEOs.
Originality/value
The study fills a gap in the literature regarding the national-level framework of managerial discretion. The results indicate that executives can take idiosyncratic and bold actions to the extent to which the cultural environment allows them to do so. Also, the authors discover new national-level antecedents of managerial discretion that have not been considered in earlier studies and confirm the context dependency of this concept.
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Runtian Jing, Yuanyuan Wan and Xia Gao
The purpose of this paper is to identify the reasons for the differences of executives' compensation across industries from the managerial discretion perspective.
Abstract
Purpose
The purpose of this paper is to identify the reasons for the differences of executives' compensation across industries from the managerial discretion perspective.
Design/methodology/approach
Based on the data from 37 manufacturing industries from 2002 to 2007 in China, managerial discretion for each industry is calculated regarding to the conception raised by Hambrick and Finkelstein which is further clustered into three groups. Then, regression model is used to testify the relation between managerial discretion and executives' compensation.
Findings
The executives' compensation is positively related to managerial discretion that is determined by the industrial environment. In the faster growing or higher competing industries, the executives tend to have more managerial discretion, thus they will be better paid due to the extensive latitude of their decision making.
Research limitations/implications
To a certain extent, managerial discretion can be taken to measure the uncertainty or marginal productivity of the executives' work. From the industrial perspective, there are actually some factors far beyond the control of executives but influencing their pay.
Practical implications
When designing the compensation system for the executives, the industrial factors surely should be taken into consideration, to work out a fair and competitive incentive plan.
Originality/value
The paper proves a very important point in the issue of the decisive factors for executives' compensation. Managerial discretion raises the uncertainty and complexity to executives' work, thus it determines the compensation.
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This paper examines the role of managerial discretion in the relation between managerial ability on the level of corporate cash.
Abstract
Purpose
This paper examines the role of managerial discretion in the relation between managerial ability on the level of corporate cash.
Design/methodology/approach
Conjoining the upper echelons theory's premises and the theoretical framework of cash holdings, we posit that the managerial ability's effect on cash policy varies with managerial discretion using firm-level data. To test the empirical prediction, we employ a linear regression model with fixed effects with a sample of US listed firms from 1980 to 2016.
Findings
The findings reveal that the positive association between the ability of chief executive officers and corporate cash savings is weakened by firm-level managerial discretion. The results are robust to various additional analyses, namely lagged independent variables regression, reduced form regression and granger causality test. Overall, the findings are generally consistent with the cash holding motives yielding transaction and precautionary demand for money. However, our findings also shed light on whether managerial discretion moderates or exacerbates agency problems related to top executives' cash holding policies.
Originality/value
This work's distinct characteristic is the investigation of the joint effect of managerial talent and discretion on a firm's cash holding, which remains unexplored in the literature.
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J. Samuel Baixauli-Soler, Gabriel Lozano-Reina and Gregorio Sánchez-Marín
The purpose of this paper is to analyze the influence of managerial discretion on the effectiveness of say on pay (SOP) as a governance mechanism. This goal covers an important…
Abstract
Purpose
The purpose of this paper is to analyze the influence of managerial discretion on the effectiveness of say on pay (SOP) as a governance mechanism. This goal covers an important gap since the issue of how effective SOP is in promoting more aligned compensation has proved somewhat controversial.
Design/methodology/approach
This empirical research opted for a panel methodology for the period 2003–2017, using a sample of large UK listed-companies (specifically, 3,445 firm-year observations). Data were obtained from several sources (Manifest Ltd, BoardEx, Worldscope, Factset Ownership and DataStream).
Findings
Results show that managerial discretion plays an important role in the effectiveness of SOP as a mechanism for increasing aligned CEO compensation. While individual discretion (latitude of objectives) exerts a negative effect, contextual discretion (latitude of action) increases SOP effectiveness. The global effect of managerial discretion is positive when there is high level of both individual and contextual discretion.
Originality/value
This empirical study provides evidence concerning an emerging topic in the literature regarding the impact of SOP as a shareholder activism mechanism of corporate governance on executive compensation. By taking managerial discretion into consideration as a relevant moderating factor, it also offers a better explanation of SOP effectiveness as a governance mechanism.
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This study examines whether management accounting knowledge and limited managerial discretion encourage and/or hinder the use of management accounting.
Abstract
Purpose
This study examines whether management accounting knowledge and limited managerial discretion encourage and/or hinder the use of management accounting.
Design/methodology/approach
Based on the data obtained from public hospitals in Japan, this study tests whether top managers with more management accounting knowledge use management accounting more. Additionally, the study verifies whether lower managerial discretion leads to the use of less management accounting and conducts hierarchical multiple regression analysis.
Findings
The results show that the higher management accounting knowledge is, the more likely management accounting is to be used. By contrast, the more limited management discretion is, the less likely management accounting is to be used.
Originality/value
The author's management accounting research based on the upper echelon theory has shown that characteristics such as the education and experience of top managers affect the use of management accounting systems. However, the impact of management accounting knowledge and managerial discretion, which is one of the important characteristics of top managers, on management accounting has rarely been studied.
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