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Article
Publication date: 15 October 2016

Martin Plöckinger, Ewald Aschauer, Martin R.W. Hiebl and Roman Rohatschek

In recent years, numerous studies have investigated whether individual executives and their characteristics relate to financial reporting choices. In this article, we review…

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Abstract

In recent years, numerous studies have investigated whether individual executives and their characteristics relate to financial reporting choices. In this article, we review archival, experimental and survey research on the influence of individual executives on corporate financial reporting and use upper echelons theory as our organizing framework. Our review of 60 studies shows that research consistently finds that top management executives exert significant influence on financial reporting decisions, particularly on disclosure quality. Empirical research has developed promising approaches to investigate executives' psychological attributes and character traits. The results of studies examining the influence of demographic characteristics of individual executives are, however, sometimes contradictory and ambiguous. Nevertheless, the overall empirical results we review are supportive of upper echelons predictions. Additional research in this field is needed to clarify the influence of unexamined upper echelon characteristics, important moderator variables, and adverse selection effects. We also suggest that future research more closely investigates the magnitudes of managerial influence and adopts a more holistic perspective on financial reporting outcomes.

Book part
Publication date: 29 August 2005

Albert A. Cannella and Tim R. Holcomb

The upper-echelons model of Hambrick and Mason ((1984). Academy of Management Review, 9, 193–206) launched a new area of research and provided the first overall theoretical…

Abstract

The upper-echelons model of Hambrick and Mason ((1984). Academy of Management Review, 9, 193–206) launched a new area of research and provided the first overall theoretical framework for use in understanding how the experiences, backgrounds, and values of senior executives in organizations can influence the decisions that they make. The model is typically assumed to be what Rousseau ((1985). In: B. M. Staw, & L. L. Cumming (Eds), Research in organizational behavior (Vol. 7, pp. 1–37). Greenwich, CT: JAI Press) calls “multi-level,” as it describes how both individuals and top management teams (TMTs) make decisions in line with their preferences, biases, and values; the same model is applicable to both individuals and groups. However, the levels issues in the model have never been subjected to rigorous analysis. This chapter juxtaposes levels concepts and theories on the upper-echelons model, in an effort to highlight its strengths as well as its weaknesses. While the majority of researchers use the model to describe team-level decision making, the analysis presented here reveals that the model is inherently individual-level in focus, and several important limitations must be overcome before the model will provide a full explanation of team-level decision making.

Details

Multi-Level Issues in Strategy and Methods
Type: Book
ISBN: 978-1-84950-330-3

Article
Publication date: 25 June 2018

Wein-Hong Chen, Min-Ping Kang and Bella Butler

Penrose’s argument regarding the managerial constraint on continual expansion over two consecutive periods is termed the “Penrose effect,” a relatively less investigated premise…

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Abstract

Purpose

Penrose’s argument regarding the managerial constraint on continual expansion over two consecutive periods is termed the “Penrose effect,” a relatively less investigated premise in Penrose’s growth theory. The purpose of this paper is to empirically re-examine the Penrose effect from the perspective of upper echelons theory and investigated how top management team (TMT) composition influences the continual growth of a firm.

Design/methodology/approach

This study empirically tested the hypotheses based on a sample of listed manufacturing firms operating in Taiwan, a newly industrialized economy in the Asia–Pacific region. Moderated hierarchical regression analyses were applied to test hypotheses.

Findings

The empirical results suggest that low TMT diversity (in terms of educational, functional and team tenure diversity) is likely to engender a situation in which the Penrose effect might occur. Additionally, the results indicate that the proportion of functional executives plays a significant role in influencing the growth trend over two consecutive periods and may soften the impact of the Penrose effect.

Practical implications

This paper suggests that appropriate structuring of TMTs and appropriate management of their members’ backgrounds and team tenure diversity can help firms overcome the Penrose effect and grow continually. Furthermore, the proportion of functional executives in a TMT is influential.

Originality/value

This paper uniquely contributes to the theoretical and empirical development of Penrose’s growth theory, upper echelons theory and resource-based view concerning managerial resources.

Details

Management Decision, vol. 57 no. 1
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 5 March 2018

Won Seok Lee, Choongbeom Choi and Joonho Moon

This study aims to investigate how upper echelon theory accounts for franchising by selecting the top management team to proxy for the upper echelon and using age, tenure…

Abstract

Purpose

This study aims to investigate how upper echelon theory accounts for franchising by selecting the top management team to proxy for the upper echelon and using age, tenure, education, equity ownership and stock options as its main attributes.

Design/methodology/approach

The sample was drawn from the Execucomp and Compustat databases and from other publicly accessible resources (e.g. LinkedIn and Business Week, in addition to Annual 10-K reports). A total of 29 restaurant companies were used for data collection, which covered the period of 2000-2013. A panel feasible generalized least squares (FGLS) regression was used to analyze the data.

Findings

The study found a significant moderating effect of the degree of internationalization on the relation between the attributes of the upper echelon (e.g. tenure, education and share ownership) and franchising decisions.

Research limitations/implications

The results verified that top managers in the restaurant industry with more tenure and share ownership become more risk averse when they operate under riskier conditions, whereas highly educated restaurant top management teams tend to take more risks in strategic decision-making.

Originality/value

This study expanded internationalization research to upper echelon theory and into the arena of franchising.

Details

International Journal of Culture, Tourism and Hospitality Research, vol. 12 no. 1
Type: Research Article
ISSN: 1750-6182

Keywords

Article
Publication date: 8 June 2015

Fabian Hattke and Steffen Blaschke

The purpose of this paper is to evaluate the influence of top management team diversity on academic excellence in universities. Academic excellence is conceptualized as…

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Abstract

Purpose

The purpose of this paper is to evaluate the influence of top management team diversity on academic excellence in universities. Academic excellence is conceptualized as successfully gaining funds for inter-organizational research collaborations, interdisciplinary graduate schools and high-ranked scientific reputation.

Design/methodology/approach

The study applies upper echelon theory to universities. Three hypotheses are developed: (overall) top management team heterogeneity is positively associated with successful funding of excellence clusters, (overall) top management team heterogeneity is positively associated with successful funding of graduate schools and (overall) top management team heterogeneity is positively associated with academic reputation. The empirical study is based on a cross-sectional dataset with a time lag, covering characteristics of 75 German public universities from 2008 to 2013. Multiple-regression analysis is applied to test the hypotheses.

Findings

Our results indicate that disciplinary and educational diversity of upper echelons has a positive effect on the outcomes. Other top management team characteristics (age, gender, etc.) show no significant effects. Besides top management team composition, we find that a high number of faculties and a broad inclusion of internal status groups (students, tenured faculty, academic and administrative staff) and external stakeholders in decision making processes may enhance academic excellence of universities.

Research limitations/implications

First, the study contributes to the body of literature concerned with higher education. It is situated at the crossroads of management studies and higher education research, unlocking strategic management theorizing for the public context. Furthermore, the study contributes to the body of literature on strategic leadership in pluralistic organizations. It highlights the importance of heterogeneous governance structures and modular organization designs for achieving academic excellence.

Practical implications

The paper may inform practitioners in administrative or leading positions and policy-makers concerned with higher education. The more diverse a top management team is in terms of multiple disciplinary backgrounds, the more likely they succeed in driving the university toward academic excellence.

Originality/value

The study is among the first to evaluate the influence of top management teams in universities with a quantitative research design.

Details

Team Performance Management: An International Journal, vol. 21 no. 3/4
Type: Research Article
ISSN: 1352-7592

Keywords

Article
Publication date: 10 May 2019

Junli Yu, Shelagh M.R. Campbell, Jing Li and Zhou Zhang

The Chief Financial Officer (CFO), despite being a critical organization member responsible for ensuring quality of financial reporting, audit and compliance, is under-researched…

Abstract

Purpose

The Chief Financial Officer (CFO), despite being a critical organization member responsible for ensuring quality of financial reporting, audit and compliance, is under-researched. Grouped as a member of top management teams (TMS) in studies, factors influencing decision making in this group rely on static measures of characteristics without regard for dynamic and longitudinal influences of career trajectories and industry occupational group memberships. The relationship between the high-tech industry as a site of notable reported internal control (IC) weakness and influences on CFOs requires closer examination. The paper aims to discuss these issues.

Design/methodology/approach

The study draws together the upper echelons theory and occupational communities (OCs) to explore the impact of shared values and behavioral norms from different sources on executive decision making. Internal and external sources of OC are proposed and their influence on activities with respect to corporate IC is tested. The sample of 1,573 firm/year observations includes high-tech firms listed on major US exchanges was developed using data from five distinct databases. Executives’ biographic information was manually collected.

Findings

Results indicate that senior financial executives belong not only to their firm and its culture but also to OCs that extend beyond the firm. Membership in professional credential granting occupational groups has less impact on effective IC than experience in the high-tech industry. In combination, multiple OCs show evidence of compound and counteracting effects on IC. The OC that arises in the high-tech industry makes a measurable positive difference in the quality of IC in sample firms, in contrast with the OC among credentialed accounting and financial professionals.

Research limitations/implications

This quantitative study of OC reveals the differential impact of different sources of OC and contributes to the literature on TMS a new framework for examining decision making. OC is typically studied through qualitative methods and, thus, potential exists to further explore the specific nature and dynamics of the OCs identified in this study.

Practical implications

The study highlights the role of broad affiliations and networks among senior financial executives which may have bearing on their ability to effectively manage IC. The role of these networks may also partially explain instances of CFO failure and thus dismissal. Knowledge of the role of OC may help boards of directors in the selection and promotion of senior financial officers of the firm.

Originality/value

The paper offers a different perspective on professional accounting expertise in one specific industry where incidence of IC weakness is high relative to other industries. Study results expand recent research on TMS to include sociological impacts of cohort groups. Despite generally weaker IC in the high-tech sector, this study demonstrates the value of exploring group membership within the industry as an important predictor of behavior. The result is a new perspective to CFO decision making which illustrates the relevance of OCs among upper echelons. The implications of findings for CFO recruitment and promotion are borne out in recent instances of senior financial executive failure in the sector.

Details

Accounting, Auditing & Accountability Journal, vol. 32 no. 4
Type: Research Article
ISSN: 0951-3574

Keywords

Content available
Article
Publication date: 14 August 2023

Christiana Osei Bonsu, Chelsea Liu and Alfred Yawson

The role of chief executive officer (CEO) personal characteristics in shaping corporate policies has attracted increasing academic attention in the past two decades. In this…

Abstract

Purpose

The role of chief executive officer (CEO) personal characteristics in shaping corporate policies has attracted increasing academic attention in the past two decades. In this review, the authors synthesize extant research on CEO attributes by reviewing 232 articles published in 29 journals from the accounting, finance and management literature. This review provides an overview of existing findings, highlights current trends and interdisciplinary differences in research approaches and identifies potential avenues for future research.

Design/methodology/approach

To review the literature on CEO attributes, the authors manually collected peer-reviewed articles in accounting, finance and management journals from 2000 to 2021. The authors conducted in-depth analysis of each paper and manually recorded the theories, data sources, country of study, study period, measures of CEO attributes and dependent variables. This procedure helped the authors group the selected articles into themes and sub-themes. The authors compared the findings in various disciplines and provided direction for future research.

Findings

The authors highlight the role of CEO personal attributes in influencing corporate decision-making and firm outcomes. The authors categorize studies of CEO traits into three main research themes: (1) demographic attributes and experience (including age, gender, culture, experience, education); (2) CEO interactions with others (social and political networks) and (3) underlying attributes (including personality, values and ideology). The evidence shows that CEO characteristics significantly affect a wide range of specific corporate policies that serve as mechanisms through which individual CEOs determine firm success and performance.

Practical implications

CEO selection is one of the most crucial decisions made by corporations. The study findings provide valuable insights to corporate executives, boards, investors and practitioners into how CEOs’ personal characteristics can impact future firm decisions and outcomes that can, in turn, inform the high-stake process of CEO recruitment and selection. The study findings have significant practical implications for corporations, such as contributing to executive training programs, to assist executives and directors attain a greater level of self-awareness.

Originality/value

Building on the theoretical foundation of upper echelons theory, the authors offer an integrated theoretical framework to consolidate existing empirical research on the impacts of CEO personal attributes on firm outcomes across accounting and finance (A&F) and management literature. The study findings provide a roadmap for scholars to bridge the interdisciplinary divide between A&F and management research. The authors advocate a more holistic and multifaceted approach to examining CEOs, each of whom embodies a myriad of personal characteristics that comprise their unique identity. The study findings encourage future researchers to expand the investigation of the boundary conditions that magnify or moderate the impacts of CEO idiosyncrasies.

Article
Publication date: 1 December 2022

Patrick Velte

The purpose of this study is to examine the relationship among chief sustainability officer (CSO) expertise, sustainability-related executive compensation (SEC) and biodiversity…

Abstract

Purpose

The purpose of this study is to examine the relationship among chief sustainability officer (CSO) expertise, sustainability-related executive compensation (SEC) and biodiversity disclosure (BD).

Design/methodology/approach

Based on legitimacy and upper echelons theory, this study uses both random-effects and logit regressions and looks at the 2014–2019 financial years of companies listed on the STOXX Europe 600 (1,992 firm-year observations).

Findings

The findings of this study are in line with prior research on sustainable corporate governance and indicate that CSO sustainability expertise significantly increases BD and that SEC strengthens this relationship as a moderating variable. The results of this study are robust to a battery of sensitivity analyses.

Originality/value

This study makes a major contribution to prior analyses, as this appears to be the first on the link among CSO expertise, SEC and BD, as per the author’s knowledge. This study has major implications for business practice, regulators and research.

Details

Journal of Global Responsibility, vol. 14 no. 2
Type: Research Article
ISSN: 2041-2568

Keywords

Article
Publication date: 12 August 2022

Jingchen Ma and Xu Huang

The purpose of this study is to examine how the experience of the top management team (TMT), such as industrial experience and functional experience heterogeneity, affect…

Abstract

Purpose

The purpose of this study is to examine how the experience of the top management team (TMT), such as industrial experience and functional experience heterogeneity, affect corporate social performance (CSP) and whether TMT faultlines act as a moderator.

Design/methodology/approach

To examine the effect of TMT experience on CSP, this study uses upper echelons theory as theoretical background, and data are selected from 212 Chinese high-polluting companies with A-shares from 2012 to 2016. The dependent variable is lagged by one year from 2013 to 2017.

Findings

Industrial experience both positively influenced CSR and negatively influenced corporate social irresponsibility. Functional experience heterogeneity had an inverted U-shaped effect on responsible behaviors and a U-shaped effect on irresponsible behaviors. Meanwhile, TMT faultlines played a moderating roles in the relationship between TMT experience and CSP, in which faultlines reinforces the non-linear relationship between functional experience heterogeneity and CSP.

Research limitations/implications

The existence of impact paths between TMT experience and corporate social performances must still be examined. Other moderators need to be verified.

Practical implications

The important ways to promote more corporate responsible behavior and reduce irresponsible corporate behavior is to choose the right team members. During team formation, it is important to have experience in related industries and select team members with different functional experiences. Companies can consider hiring executives who tend to work together and have relevant experience, which can reduce the time cost of unnecessary conflicts.

Originality/value

This study combined the upper echelons theory with some attention perspectives to study the impacts of TMT experience on CSP.

Details

Nankai Business Review International, vol. 14 no. 4
Type: Research Article
ISSN: 2040-8749

Keywords

Article
Publication date: 2 February 2023

Nischal Thapa and Puspa Shah

This study identifies and examines psychological and environmental factors that influence the long-term orientation of top management teams (TMTs).

Abstract

Purpose

This study identifies and examines psychological and environmental factors that influence the long-term orientation of top management teams (TMTs).

Design/methodology/approach

Data on S&P 500 companies from 2011 to 2020 are collected from the Compustat database. Additional variables were measured through content analysis of earnings conference calls. This study used two-stage least squares regression with fixed effects to analyze the data and test the hypotheses. Appropriate diagnostic tests were conducted to ensure validity and eliminate endogeneity.

Findings

The results indicate that a chief executive officer’s (CEO) promotion focus positively and significantly influences the TMT's long-term orientation. However, the influence of prevention focus is statistically insignificant. Furthermore, the results indicate that environmental hostility moderates both relationships.

Practical implications

The TMT's long-term orientation can be improved through the insights provided by this study.

Originality/value

To the authors’ knowledge, this is the first study to examine the collective effects of psychological and task environmental factors on the long-term orientation of the TMT. Additionally, this study sheds light on the internal dynamics of the top-management team.

Details

Journal of Advances in Management Research, vol. 20 no. 2
Type: Research Article
ISSN: 0972-7981

Keywords

1 – 10 of over 3000