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This study contributes to the emerging literature on board co-option by examining how and to what extent co-opted directors influence managers' attitudes about earnings management. We find robust evidence that co-option mitigates both real activities and accrual-based earnings management. Our findings support the view that higher co-option reduces managerial short-termism because it enhances managers' job security as co-opted directors are known to be less likely to remove managers from office. Our results are robust to different measures of both co-option and earnings management, and they continue to hold after accounting for endogeneity and selection concerns. Finally, we provide additional evidence showing that a higher degree of co-option lowers the likelihood of the chief executive officer (CEO) being forcefully removed from the office for managing earnings in the previous year. JEL CLASSIFICATION G30; G34; G39 [ABSTRACT FROM AUTHOR]

Academic experience has been found to significantly impact on the attitudes and behaviors of managerial decision‐makers, which in turn influences corporate strategic decisions. However, the impact of academic decision‐makers on corporate ethical decisions, particularly corporate social irresponsibility (CSIR), has yet to receive due attention to date. In this study, we integrate the upper echelons theory and managerial discretion literature to examine whether and when academic CEOs (CEOs with academic experience) influence corporate social irresponsibility (CSIR). First, we suggest that academic CEOs discourage CSIR because they have higher moral standards; thus, their companies are less likely to engage in CSIR activities. In addition, we propose that negative attainment discrepancy (slack resources) reduces (enhances) academic CEOs' managerial discretion to incorporate their ethical preferences into their decisions, thereby weakening (enhancing) the above relationship. This study is the first to examine the relationship between academic CEOs and CSIR. Additionally, the empirical findings of this study offer crucial insights for shareholders and policymakers to prevent or mitigate CSIR effectively. [ABSTRACT FROM AUTHOR]

This study explores how CEOs' insurance behaviours outside the workplace, as measured by the premium rates of their self‐purchasing critical illness insurance, are related to corporate social responsibility (CSR) performance. We show that such behaviours (i.e. the CEO‐insurance effect) capture the variation in CEOs' risk aversion and are positively associated with CSR performance. We also find that our results align with the risk mitigation hypothesis rather than the agency conflict hypothesis. Additional analysis reveals that the main effect is more pronounced among firms in uncertain environments. Further evidence shows that accounting conservatism and internal control are potential channels through which the CEO‐insurance effect boosts CSR performance. Collectively, our evidence contributes to research on managerial risk attitude, heterogeneity in CSR policies and 'off‐the‐job' determinants of CEOs' styles. [ABSTRACT FROM AUTHOR]

We examine the role of cultural heritage in shaping U.S. CEOs' attitudes toward uncertainty, in the context of their corporate acquisition decisions. We find that CEOs with a more uncertainty-avoiding cultural heritage are less likely to engage in acquisitions. Conditional on making an acquisition, uncertainty-averse CEOs prefer targets in familiar industries and targets that can be more easily integrated. The emphasis on cultural identity by CEOs' parents and the ethnic composition of CEOs' early life environment significantly influence the cultural transmission process. Cultural differences about uncertainty attitudes persist over multiple generations, but become less pronounced over time. (JEL G34, G4, G40, G41) [ABSTRACT FROM AUTHOR]

How does CEOs' trait empathy affect their management of organizational crises? So far, management scholars have highlighted mostly positive effects of CEOs' empathy in the emotionally charged context of crises. We combine the emerging critical perspective on empathy with research on upper echelons and crisis management to provide a more balanced portrayal of the influence of CEO empathy on crisis management. Specifically, we argue that, on the one hand, highly empathic CEOs will recognize warning signs more quickly, have access to more crisis-related information, gain greater stakeholder appreciation via displays of compassion, and be more committed to healing the organization's relational system. On the other hand, they also may be more predisposed to false alarms, more biased in processing crisis-related information, overinclined toward apologetic sensegiving, and less committed to repairing the organization's operational system. Ultimately, we propose that CEOs' empathy influences their effectiveness in the various tasks of crisis management in an inverted U-shaped pattern. Our theory offers an upper echelons view of organizational crises, particularly by illuminating the roles of empathy and emotions in executives' crisis management. We also introduce a novel, "too-much-of-a-good-thing" perspective on CEO empathy, providing abundant opportunities for future research. [ABSTRACT FROM AUTHOR]

We show that chief executive officers (CEOs) exhibit a hometown bias in acquisitions. Firms are over twice as likely to acquire targets located in the states of their CEOs' childhood homes than similar targets domiciled elsewhere. Small, private home-state deals underperform other small, private deals, and the bias is stronger when acquirer governance is lax, suggesting that CEOs acquire private home-state targets for their own benefits. In contrast, large, public home-state acquisitions are value enhancing. CEOs create value in public home-state acquisitions by avoiding extremely poor deals and through deals with higher synergies. Thus, both agency issues and hometown advantages drive home-state acquisitions. [ABSTRACT FROM AUTHOR]

Research Summary: While real options theory has been applied with the optimality assumption, actual real options investments are made by managers, who are subject to cognitive biases, especially under uncertainty. In this article, we focus on one important type of cognitive bias, overconfidence, to provide new insights on real options literature. We argue that overconfident CEOs will invest less in real options than non‐overconfident CEOs. We also predict that the relationship between overconfident CEOs and firms' real options intensity will be strengthened when market uncertainty is higher. In a study of U.S. public firms, we find strong support across various tests that use multiple measures of overconfidence in CEOs and real options investments, and control for potential selection issues and other endogeneity concerns. Managerial Summary: This article studies how a CEO's cognitive bias, overconfidence, may shape a firm's real option investments, which could result in a different level of strategic flexibility. We argue that overconfident CEOs have overly high expectations of their performance under uncertainty and/or underestimate the level of uncertainty in their strategic decision‐making, which leads to lower investments in the firms' real options relative to non‐overconfident CEOs. We study a sample of U.S. public firms and find strong evidence that an overconfident CEO is positively related to the real options investments at the firm level. We also find that this overconfidence effect becomes more pronounced in markets with greater uncertainty. [ABSTRACT FROM AUTHOR]

Research Summary: This study builds on insights from the upper echelons tradition in strategy to examine the effects of chief executive officer (CEO) Machiavellianism on relevant firm costs. While Machiavellianism has been usually construed as a purely negative trait, we argue that the pragmatic focus on the outcomes of exchanges and psychological obsession with winning in transactions that Machiavellian CEOs infuse in their organizations can have important effects on firm cost, a fundamental but frequently understudied driver of financial performance in strategic management research. In line with our arguments, we find that CEO Machiavellianism has negative effects on production costs, financing costs, and acquisition premiums. We find support for our ideas with a sample of S&P 500 CEOs, operationalizing CEO Machiavellianism using a videometric approach Managerial Summary: In this study, we investigate the effect of CEO Machiavellianism on firms' costs. We show that firms with more Machiavellian CEOs will have lower costs than other firms in the market. Rather counterintuitively, this study suggests an explanation for why a personal characteristic that is usually seen as problematic for organizations is rather common in their upper ranks. Ultimately, the study demonstrates the value of the bargaining attitude that Machiavellian CEOs bring to their organizations and suggests this value should be weighed against their risks or acknowledged to manage the risks this common personal characteristic implies. [ABSTRACT FROM AUTHOR]

Research Summary: We consider the link between firms' decisions to adopt a CSR executive position and the political ideology of prior adopter CEOs. We theorize that firms are more likely to adopt a CSR executive position when it has been previously adopted by conservative‐leaning CEOs at other firms, as opposed to liberal‐leaning CEOs. This effect is due, we argue, to the increased perceptual salience and situational attributions associated with ideologically incongruent actions (i.e., actions that appear inconsistent with known political values). We further posit that these effects are stronger when the observing firms experience increased salience of CSR issues due to shareholder pressure and institutional equivalence between the referent and the observing firms. We find support for these ideas in a longitudinal sample of Fortune 500 companies. Managerial Summary: How do CEOs' values affect industry‐wide appointments of senior executives in charge of Corporate Social Responsibility (CSR)? Prior research suggests that liberal political beliefs of CEOs predict their CSR commitments. Our study explores how the political beliefs of CEOs—in this case, CEOs who have created a new CSR executive position in their companies—influence the likelihood that peer CEOs will imitate their decisions. Specifically, we find that when conservative CEOs adopt a CSR executive position, other companies are more likely to follow than when liberal‐leaning CEOs do so. These effects are even stronger when companies are experiencing CSR‐related pressure from shareholders and when they belong to the same industry and community as the firms of the CEOs they are observing. [ABSTRACT FROM AUTHOR]

We investigate the risk choices of risk-averse CEOs. Following recent theoretical work, we expect CEO risk aversion to be more pronounced in firms with high leverage or high default probability. We find that the CEOs of these firms reduce firm risk, even in the presence of strong risk-taking incentives. Our results are robust to controls for the sensitivity of CEO wealth to stock price changes, firm risk determinants, the endogenous feedback effects of firm risk on CEO incentives, unobserved firm and market effects, and debt governance. The impact of CEO risk aversion is economically significant. [ABSTRACT FROM PUBLISHER]

We consider a central puzzle surrounding CEO accountability: What explains the payoffs and penalties that CEOs receive? Invoking Fama's concept of "settling up," we examine how a CEO's entire performance record and history of prior over- or under payment affect current pay and the odds of dismissal. We find that some parts of a CEO's historical track record work to remedy prior over - or underpayment, whereas other aspects result in greater imbalances, as rich CEOs get richer while poorer ones get poorer. History matters when boards reward or punish their CEOs, but such reckoning is relatively complex. [ABSTRACT FROM AUTHOR]

This study examines factors influencing CEOs' willingness to provide social support to fellow CEOs who are experiencing significant personal problems (e.g., marital difficulties) and the benefits of support for CEOs who receive it. Our theoretical model suggests that CEOs who are more strongly identified with the corporate elite provide more support to fellow CEOs and that CEOs who receive more support engage more frequently in important leadership behaviors and are ultimately more effective as corporate leaders. Analyses of our unique data set, which includes survey responses from a large sample of CEOs, provide consistent support for our theory. [ABSTRACT FROM AUTHOR]

The agency problem of listed companies in East Asia is closely related to their typically concentrated ownership structures. Tight control creates an entrenchment problem that allows the controlling owners' self-interested behaviors to go unchallenged internally by the boards of directors or externally by takeover markets. The primary objective of this paper is to explore the association between the ownership and control structure and innovation. The ownership and control structure is measured first as the divergence between the ultimate owner's voting rights and the ultimate owner's cash flow rights, and second by the presence of ultimately controlling shareholder's family member as CEO or Chairman of the board, or both. Innovation is measured by patent quantity and patent quality. This paper uses patents granted by the U.S. Patent and Trademark Office (USPTO) to measure innovation activities. We find that innovation is significantly and negatively related to the level of agency problems. We further find that innovation is lower for firms whose controlling owner is also either the chief executive officer or the chair of the board of directors. Our findings appear to be robust with respect to examining patent count and patent quality variables. [ABSTRACT FROM AUTHOR]

A large-scale survey of U.S. top executives and fund managers is used to examine how executives may use interpersonal influence behavior to prevent powerful institutional investors from using their coercive power to force changes in corporate governance and strategy. We theorize that high levels of institutional ownership may prompt CEOs to engage in interpersonal influence behavior in the form of ingratiation and persuasion directed at institutional fund managers, which deters them from using their ownership power to coerce changes that could benefit shareholders at the expense of top management. The results support our theory, indicating that CEOs' ingratiation and persuasion tactics toward institutional fund managers reduce the effect of institutional ownership on specific changes in board structure and composition, CEO compensation, and corporate strategy that are believed to compromise management's interests. Our theory and findings suggest the importance of considering how interpersonal influence processes can provide an alternative source of influence in relationships between corporate leaders and external constituents. [ABSTRACT FROM AUTHOR]

We unpack the concept of managerial risk taking, distinguishing among three of its major elements: the size of an outlay, the variance of potential outcomes, and the likelihood of extreme loss. We then apply our framework in hypothesizing the effects of CEO stock options on strategic behavior and company performance. We find that CEO stock options engender high levels of investment outlays and bring about extreme corporate performance (big gains and big losses), suggesting that stock options prompt CEOs to make high-variance bets, not simply larger bets. Finally, we find that option-loaded CEOs deliver more big losses than big gains. [ABSTRACT FROM AUTHOR]

Extending Hambrick's (1994) concept of behavioral integration, a meta-construct of top management team process, we theorized on the extent to which CEO-, team-, and firm-level determinants shape behavioral integration. Using survey data from 402 firms, we developed a reliable measure of the construct and found strong support for our structural model. Although determinants at each level explained some variance in behavioral integration, considering all three levels in concert explained the most variance. [ABSTRACT FROM AUTHOR]

Using unique data provided by the CEOs of 80 large U.S. firms, the authors examined relationships among the stakeholder attributes of power, legitimacy, urgency, and salience; CEO values; and corporate performance. They found strong support for the attribute-salience relationship and some significant relationships among CEO values, salience, and corporate social performance but found no support for a salience-financial performance link. Their findings suggest a need for continued emphasis on the development of normative stakeholder theory. [ABSTRACT FROM AUTHOR]

Research question/issue: This study examines whether there is decoupling between how firms communicate about corporate social responsibility (CSR) and what firms do in terms of CSR. We argue that this CSR decoupling is driven by the CEOs' cognitive biases. Specifically, we propose that overconfident CEOs increase CSR decoupling. Research findings/insights: We tested our arguments in a sample of S&P 500 firms for the period of 2006–2014. We find that CEO overconfidence is positively related to the decoupling between the optimistic tone of CSR reporting and the firm's actual corporate social performance. However, the board of directors mitigates the effect of CEO overconfidence on CSR decoupling when outside directors have CSR expertise and ownership incentives. Theoretical/academic implications: Previous studies have suggested that CSR decoupling is a function of opportunistic management that can be constrained by external monitoring. We examine CSR decoupling as a function of cognitive biases (such as overconfidence) that can be constrained by internal monitoring. Practitioner/policy implications: This study provides insights into the conditions when CSR information released by the firm is symbolic. Practitioners may prevent such symbolic CSR reporting by imposing effective oversight by the board of directors. [ABSTRACT FROM AUTHOR]

Most theories of corporate governance argue that chief executive officers (CEOs) take less risk as they near the end of their career, and therefore are less likely to make major investments. This prediction is based on decisions related to firm‐specific benefits; however, it may not be generalizable to decisions that involve broad societal goals. In terms of societal investments, CEOs with a longer time perspective may be more likely, rather than less likely, to invest. In this paper, we argue that a CEO's future time perspective is fostered by shorter career horizons, longer tenures, higher organizational ownership and less short‐term compensation. We test these hypotheses on 150 observations from the US investor‐owned electric power generation sector over a three‐year unbalanced sample (64.3% of the population). We applied random‐effects generalized least squares (GLS) estimations to test our hypotheses, and found support for three out of four hypothesized relationships. [ABSTRACT FROM AUTHOR]

Interviews with 26 CEOs across a wide variety of industries reveals their concerns as well as agenda and behavior. The issues discussed have been placed against four intellectual frameworks to get a better picture of CEO concerns. These executives frequently ponder institutional and corporate strategy but very seldom business strategy and competitive markets. The plurality of the concerns deal with issues of management development and human resource management. Where the question is one of changing or redirecting the strategy of the firm, it is often put in the context of looking inside the firm at top managers and organization culture. [ABSTRACT FROM AUTHOR]

This study examined how chief executive and top management team characteristics interact with organizational performance to influence strategic change. Results indicate that poor performance, long chief executive and top management team tenures, and high diversity in top management team tenure are associated with greater levels of strategic change. In addition, poor performance moderated the relationship between managerial characteristics and strategic change, increasing the likelihood of the latter. [ABSTRACT FROM AUTHOR]

Chief executives in one national and three regional samples participated in a study of the content and structure of their organizational visions. Executives clustered in three groups distinguished by differing orientations to derived factors. Cluster membership was found to be related to the rapidity of firm change, the amount of control the executives exercised over firms, and other variables. Vision showed a multifaceted structure, with factors for vision formulation, implementation, and innovative realism being most prominent. No differences in vision were found with respect to region or firm size, but the responses of executives differed from those obtained in an earlier study of business school deans. [ABSTRACT FROM AUTHOR]

Our hypotheses were that the influence of chief executive officers (CEOs) over boards of directors and the likelihood that the CEOs' compensation packages will reflect their preferences increase with CEO company tenure. Results of empirical tests were consistent with this argument, suggesting that the relationship between CEO pay and stock returns weakens with tenure. [ABSTRACT FROM AUTHOR]

Comparative studies of private and public sector organizations often consider organizations with dissimilar tasks or business purposes: profit-making business firms commonly represent the private sector, and nonprofit service or government regulatory agencies commonly represent the public sector. However, these studies generally have not accounted for this difference in business purpose, and have attributed the differences that have frequently been observed to organizations' affiliations with the presumably different sectors (e.g., Blumenthal; 1979; Buchanan, 1975; Buyot, 1962; Rainey, 1983; Rainey, Backoff, & Levine, 1976; Wamsley & Zald, 1976). The argument for this all too common use of the distinction between public and private sectors as the basis of a framework for interpreting observed differences is that the legitimizing goals and basic orientations of the two sectors vary, and so determine different institutional milieux for organizations affiliated with each. Hence, investigators expect differences between the two sectors in organization-environment relations and in managerial practices. The purpose of this study is to examine whether or not these commonly expected private-public differences emerge from a comparison of environmental perceptions of chief executive officers (CEOs) of organizations having similar task environments--that is, public and private industrial organizations. If, when similar organizations are compared, the expected differences in perceived environments appear, the case for sector differences would be considerably strengthened. But, if such a comparison fails to support the expected differences, it will suggest that perceived differences in organization-environment relations are probably due to differences in task or functional environments, rather than to sector affiliation. [ABSTRACT FROM AUTHOR]

The Miles and Snow strategic typology is tested and extended. Based on a sample of businesses in the PIMS data base, the study explores the effectiveness of the strategic types in different environments and the ways in which defenders and prospectors differ in their functional attributes. [ABSTRACT FROM AUTHOR]

The article focuses on a study that compares the views of executives and students participating in masters of business administration programs on corporate promotion practices. The purpose of this study is to pinpoint the perceptions of chief executive officers in large organizations pertaining to the types of behavior that lead to and important in attaining promotions. The study examines the same perceptions held by masters of business administration students. According to the results of the study, with experience, managers tend to focus more on employee ability than on any other factors.

Firms facing imminent bankruptcy would seemingly be under some pressure to demonstrate effective governance structures as a means for maintaining the support of important external constituents and initiating a turnaround. Little is known, however, about CEO and director turnover and its impact on the composition and structure of the board in failing firms. This study assesses both the incidence and form of governance changes in the 5-year period prior to corporate bankruptcy. Despite extensive board member and CEO replacements, changes by firms at imminent risk of failure do not conform with the prescriptions favored by reform advocates and institutional investors. [ABSTRACT FROM AUTHOR]

This study investigated the relationship between perception of environmental uncertainty (PEU) and environmental scanning behavior of Chief Executive Officers of 47 manufacturing firms in Nigeria. The results indicated that perceived uncertainty in the environment was significantly higher for the task environment sectors than for the remote environment sectors; and as perceived uncertainty increased in a sector of the environment, scanning frequency and scanning interests also increased. The results were compared with those of prior research in the area of environmental scanning. The results show both the economic and political legal sectors of the environment to be more salient for Nigerian manufacturing executives than for their American counterparts. [ABSTRACT FROM AUTHOR]

This research note suggests metric conjoint analysis (Louviere, 1988) as a tool for evaluating the decision policies employed by top managers in making strategic decisions. As an example of the technique, a descriptive field study is presented wherein the decision rules for stategy-structure-environment alignment used by the chief executives of 33 autonomous, nondiversified manufacturing firms are examined. Implications for future strategy research on managerial cognitions are discussed. [ABSTRACT FROM AUTHOR]

This study tested the theory that the characteristics of British chief executives would be different from that of the subordinate top management team from which they emanated. The study focused upon variations in experiences over three sets of variables: corporate influences; e.g. tenure, mobility, functional experience, international exposure; domestic influences; e.g. education, family influence; and their self-concept; e.g. aspiration levels, executive success traits. Substantial differences emerged between the two groups across all sets of variables, particularly within the corporate category. [ABSTRACT FROM AUTHOR]

This paper reports on the results of a study of the attitudes of international chief executives toward supervisory values and practices. As such, this paper is part of a larger study of the attitudes of international chief executives toward education and management education, business responsibility, and labor-management relations and supervision. Questionnaires were set to 571 top executives throughout the world to test the role of culture in explaining the attitudinal responses of the responding population. Usable replies were received from 177 top executives (or 31 percent of the sample chosen). Statistically significant differences were found for the five cultural groupings in five of the eight questions dealing with supervisory values and practices. Furthermore, the confidence level was greater than 0.001 in four of the five significant questions. The results were also tested with other demographic characteristics. Only in the cases of (a) ownership of firm by chief executive, and (b) size of company were there significant differences in at least one-half of the questions. The results of the analysis of variance tests supported the hypothesis that culture plays an important role in explaining the differences in attitudinal responses by the chief executives. The value of the findings rests with the need of international firms to recognize the limitations of any universal managerial philosophy at the present time. [ABSTRACT FROM AUTHOR]

The authors discuss research by Nihat Aktas and others concerning why chief executive officers (CEO) create less value with successive acquisitions. Although observers may think that CEO hubris or overconfidence is to blame, the study by Aktas suggests that CEOs are able to correctly assess expected value. However, with successive acquisitions, they improve their ability to manage the risks that accompany the integration of acquisitions. Therefore, they may be willing to pay a higher price for acquisitions.

The article discusses how executive compensation may affect the behavior of managers. The author discusses a study by researchers Rangarajan Sundaram and David Yermack that suggests that pension plans such as deferred compensation and supplemental executive retirement plans (SERP) may encourage conservative behavior by managers to reduce debt and risk. The study also suggests that chief executive officers (CEO) are more likely to retire if pensions are vested. The author notes another study that indicates executives with pensions tied to stocks engaged in riskier investment decisions.

Research summary: We examine the influence of CEO and compensation committee liberalism on top management teams (TMT) pay arrangements. Given that politically liberal individuals tend to value egalitarianism, we test whether firms with liberal CEOs tend to (1) reduce pay dispersion among non- CEO executives; and (2) reduce pay gaps between CEO and non- CEO executives, and whether compensation committee liberalism moderates these relationships. We find some evidence of a direct effect of CEO liberalism on TMT pay arrangements as well as some interaction between CEO and compensation committee liberalism on the pay arrangements. This study provides a better understanding of the antecedents of TMT pay arrangements and empirical evidence showing the influence of values at the top of organization. Managerial summary: Do the values of the CEO and compensation committee influence the pay of other top managers? Our study provides evidence that political ideology affects top manager pay. We examine whether CEO liberalism produces more egalitarian pay arrangements among top managers, and whether the liberalism of the compensation committee affects that relationship. We find that CEO liberalism reduces differences in the total pay among top managers, but does not influence the difference between CEO total pay and the total pay of top managers. We also find that compensation committee liberalism strengthens the negative influence of CEO liberalism on differences in total pay among top managers. Finally, we find that CEO liberalism reduces the difference between CEO bonus pay and the bonus pay of other top managers. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]