Behavioral Agency Perspective Research Articles

CEO Current Option Wealth at Risk and Lobbying Breadth: A Behavioral Agency Perspective

CEO Current Option Wealth at Risk and Lobbying Breadth: A Behavioral Agency Perspective

How do executive excess compensation affect enterprise technological innovation: Evidence from a panel threshold model of chinese biopharmaceutical companies

This study examines the levels of executive excess compensation (EEC) that stimulate the quality and efficiency of enterprise technology innovation (ETI). Using a behavioral agency perspective, we investigate how companies achieve superior ETI by providing sufficient incentives to motivate executives to perform to the best of their abilities. We use a panel threshold model based on a sample of Chinese-listed biopharmaceutical companies and find that: (1) providing an EEC between 0.0592 and 0.1907 significantly affects the promotion of ETI quality; (2) regarding ETI efficiency, executives generally do not receive the compensation that they deserve; and (3) the existing EEC has a weak negative impact on ETI efficiency, gradually disappearing as compensation increases. Heterogeneity analysis reveals that restricting EEC to the eastern area and strengthening the supervision of EEC in state-owned enterprises are effective measures for stimulating ETI. We advance the literature by providing guidance on compensation plans to companies in different regions.

Utjecaj upravljačkog i institucionalnog vlasništva na tržišnu vrijednost korporativnih spin-off poduzeća

Corporate spinoffs are tax-free transactions between the parent firm (a.k.a. divesting firm) and its newly created, independent spun-off subsidiary (a.k.a. child firm) to increase value for both sides’ shareholders. As critical governance mechanisms, in this study we examine the effects of institutional and managerial ownerships on the market value of spun-off subsidiaries based on the corporate governance literature and behavioral agency perspective. In our sample, we have 144 completed U.S. spinoffs within a 14-year of time span, which are drawn from the SDC Platinum. According to our empirical analysis, we have found that both ownership structures have significant negative effects on the change in market value of the child firm. In addition, we have examined the interaction effect of both ownerships, which results in another significant effect in the opposite direction. Thus, this study reveals the critical importance of institutional and managerial ownerships for the market success of spun-off subsidiaries.

A compassion-centric behavioral agency perspective for organizations in times of crisis

In times of crisis, organizations face a dilemma: How should they balance between minimizing losses and surviving financially, and acting for the benefit of all stakeholders and of society at large? In theory, managers should balance between multiple demands, forgoing short-term profits to address human needs when necessary. But in practice, managers may face challenges in balancing demands during a crisis. Combining the stakeholder-agency and compassion perspectives in the context of crisis management, we present the compassion-centric behavioral agency in crisis (CCBAC) framework to address this theory-practice gap. We suggest three levers for organizations and policymakers to encourage this behavior from organizations: developing and using technological and innovation capabilities, paradoxical leadership behaviors, and employee well-being and generosity programs. Organizations benefit from the CCBAC framework because they become better positioned to maintain their long-term competitive advantage and positive organizational identity while contributing to the needs of society. Policymakers benefit from incentivizing such organizations because they serve as an intermediary to achieve outcomes for society at large. Throughout this article, we use the COVID-19 pandemic, responses to mass shootings, and other example crises to highlight the tension and opportunity within our “both/and” approach. We conclude that organizations can be compassionate even as they pursue profit and efficiency in the long run.

A Compassion-Centric Behavioral Agency Perspective for Organizations in Times of Crisis

In times of crisis, organizations face a dilemma. How should they balance between minimizing losses and surviving financially, and acting for the benefit of all stakeholders and society-at-large? In theory, managers should balance between multiple demands, forgoing short term profits to address human needs when necessary. Yet, in practice, managers may face greater challenges in balancing demands during crisis. Combining the stakeholder-agency and compassion perspectives in the context of crisis management, we present the compassion-centric behavioral agency in crisis (CCBAC) framework to address this theory-practice gap. We suggest three levers for organizations and policy makers to encourage this behavior from organizations: developing and using technological and innovation capabilities, paradoxical leadership behaviors, and employee well-being and generosity programs. Organizations benefit from the CCBAC framework because they become better positioned to maintain their long-term competitive advantage and positive organizational identity while contributing to the needs of society. Policy makers benefit from incentivizing such organizations because they serve as an intermediary to achieve outcomes for society at large. Throughout, we use COVID-19 pandemic and other crises as examples to highlight the tension and opportunity within our “both-and” approach – organizations can be compassionate and pursue profit and efficiency in the long run.

The Effect of Corporate Governance on Investment in Education and Training : A Behavioral Agency Perspective

The Effect of Corporate Governance on Investment in Education and Training : A Behavioral Agency Perspective

Revisiting the Effect of Family Involvement on Corporate Social Responsibility: A Behavioral Agency Perspective

This paper sheds light on the incongruent findings concerning the relationship between family involvement and firms’ corporate social responsibility (CSR). While prior studies have mainly taken the perspective of families’ socioemotional wealth preservation, we approach this relationship from the perspective of behavioral agency theory, highlighting the important role played by CEOs’ family memberships. Specifically, we posit that family firms are more likely to invest in CSR when their CEOs are members of the controlling families. Furthermore, we examine how family firms can employ long-term incentives to encourage non-family CEOs to act in the interests of the controlling families to preserve SEW and thus enhancing family firms’ CSR performance. We tested our hypotheses using hand-collected data of family firms included in the S&P 500 index, in the period of 2003–2010. The empirical findings support our hypotheses that (a) family firms with family members as the CEOs have better CSR performance and (b) family firms tend to provide a high level of long-term incentives to non-family than family CEOs. In addition, long-term incentives strongly motivate CEOs to improve firms’ CSR performance, regardless of their family memberships.

Government Direct-Financing in Firm R&D and Innovation Performance: A Behavioral Agency Perspective

Although government direct-financing in firms’ R&D investment can contribute to firm innovation, it remains ambiguous how firms deploy these resources to different types of innovation– explorative versus exploitative innovation. In this study, we adopt the behavioral agency perspective which is an integration of agency and prospect theory, and propose that government direct-financing in firm R&D projects decreases the risks of innovation for firms, contributing to both types of firm innovation, especially the explorative innovation. However, a firm's prior financial performance and industry peer innovation performance can have opposite moderating effects on the relationship between government direct-financing in R&D and the two types of innovation. These hypotheses are largely supported with tests using a rich survey data set of firms based in China. Implications for research and practice will be discussed.

The impact of family control on firm performance: Evidence from Portugal and Spain

This study aims to assess performance differences between family and non-family firms, taking into account the Portuguese and the Spanish stock markets. We provide new evidence for this field since we take into account the heterogeneity among family firms. Our thesis is that the leadership of family firms, and the firm's size and age are moderators of the relationship between family control and firm performance. Using a panel data methodology, our main results show that family firms, especially the smaller and older, exhibit at least the same performance as non-family firms. Based on the results of the study, who manages the family firm does matter through influence on a firm's risk exposure and financial performance. These findings are consistent with the behavioral agency perspective: the family's desire to maintain socio-emotional wealth, and also to assure the firm's performance and survival. This study makes several theoretical and methodological contributions.

How Venture Capitalists Influence Innovation Novelty at Different Venture Stages

We explore how and under what conditions venture capital (VC) funding affects a new venture’s propensity to generate novel innovations. Drawing on behavioral agency perspective, we suggest that venture capitalists (VCs) are initially motivated to boost their prospective wealth and help their early stage venture investees to develop novel innovations. However, as VCs’ current wealth dominates prospective wealth with their late stage investees, leading to greater risk-aversion propensity, VC funding has a negative effect on innovation novelty of late stage ventures. We further argue that the VC effect on innovation novelty of their venture investees depends on the power sources of venture CEOs, who are responsible for the managerial decisions at their respective ventures. Based on a sample of 456 biotech ventures, we find that structurally powerful CEOs, who are in a position to take greater risk, intensify the positive effect of VC funding on innovation novelty of early stage ventures and attenuate the negative effect of VC funding for late stage ventures. However, CEOs with expertise power, typically seeking more balanced innovation orientation, attenuate both the positive effect of VC funding on innovation novelty of early stage ventures and the negative effect of VC funding for late stage ventures.

The Decision of the Supply Chain Executive to Support or Impede Supply Chain Integration: A Multidisciplinary Behavioral Agency Perspective

Applying the behavioral agency model developed by Wiseman and Gomez-Mejia (1998), this paper analyzes human resource factors that induce supply chain executives (SCEs) to make decisions that foster or hinder supply chain integration. We examine two internal sources - compensation and employment risk - and one external source - environmental volatility - of risk bearing that can make SCEs more reluctant to make the decision of promoting supply chain integration. We argue and empirically confirm the notion that an employment and compensation system that increases SCE risk bearing reduces the SCE´s willingness to make risky decisions and thus discourages supply chain integration. We also reveal that this negative relationship becomes stronger under conditions of high environmental volatility. In addressing the “so what?” question, we find empirical support for the hypothesis that supply chain integration positively influences operational performance. Even though this decision has positive value for the firm, we found that SCEs discourage supply chain integration when they face higher risk bearing. Hypotheses are tested using a combination of primary survey data and archival measures in a sample of 133 Spanish firms.

Firm Performance Context, in-the-money CEO Stock Options, and Corporate Acquisitions

While most prior agency-based research suggests that stock options grants induce CEOs to undertake risky corporate acquisitions, recent research grounded in the behavioral agency perspective demons...

Outside directors' experience, TMT firm-specific human capital, and firm performance in entrepreneurial IPO firms

Drawing on the behavioral agency perspective and entrepreneurship literature, we examine the impact of board configuration at the time of an IPO on top management team (TMT) firm-specific human capital, and firm performance in young IPO firms. The results show that the ratio of outside directors at the time of an IPO has a positive relationship with the attrition of TMT firm-specific human capital in the first two years following the IPO. Outside directors' industry- and firm-specific experiences negatively moderate this relationship. Finally, our study provides evidence that TMT firm-specific human capital attrition negatively affects subsequent firm performance.

The Decision of the Supply Chain Executive to Support or Impede Supply Chain Integration: A Multidisciplinary Behavioral Agency Perspective*

ABSTRACTApplying the behavioral agency model developed by Wiseman and Gomez‐Mejia (1998), this article analyzes human resource factors that induce supply chain executives (SCEs) to make decisions that foster or hinder supply chain integration. We examine two internal sources (compensation and employment risk) and one external source (environmental volatility) of risk bearing that can make SCEs more reluctant to make the decision to promote supply chain integration. We argue and empirically confirm the notion that an employment and compensation system that increases SCE risk bearing reduces the SCE's willingness to make risky decisions and thus discourages supply chain integration. We also reveal that this negative relationship becomes stronger under conditions of high environmental volatility. In addressing the “so what?” question, we found empirical support for the hypothesis that supply chain integration positively influences operational performance. Even though this decision has a positive value for the firm, we showed that SCEs discourage supply chain integration when they face higher risk bearing. Hypotheses are tested using a combination of primary survey data and archival measures in a sample of 133 Spanish firms.

Executive Incentive Schemes in Initial Public Offerings: The Effects of Multiple-Agency Conflicts and Corporate Governance

Combining a behavioral agency perspective with research on multiple-agency conflicts, this article examines factors affecting the implementation of equity-based incentive schemes in initial public offerings (IPOs). With a unique sample of U.K. IPO companies between the years 1998 and 2002, it shows that conditional (performance-related) incentive schemes are negatively associated with share ownership and board power of the IPO’s founding directors. However, the retained ownership of venture capital firms is positively associated with the probability of conditional incentive schemes. Board independence weakly effects on the toughness of executive compensation. The article’s interesting findings suggest a number of avenues for a future analysis of the governance development process in threshold firms.

CEO stock option pay and R&D spending: a behavioral agency explanation

This study applies the behavioral agency perspective to investigate the relationship between CEO stock option pay and a firm's R&D spending. This study argues that such a linkage is contingent upon two contextual factors – slack resources and firm performance – that influence the managerial perception of the downside risk associated with R&D investment. Using panel data from four R&D intensive industries, this study shows that the positive impact of CEO stock option pay on R&D spending is more prominent when slack resources are abundant, or when firm performance is high.

Strategic Satisficing? A Behavioral-Agency Perspective on Stock Repurchase Program Announcements

Executives confront potentially conflicting pressures - to maximize shareholder wealth in the long term and to appease shareholders in the near term. Because near-term pressures must be addressed to preserve tenure and to realize the potential benefits of long-term strategies, executives are increasingly likely to rely on shareholder mollification initiatives. We develop a behavioral-agency theoretical framework to study how stock repurchase programs are used to help top managers appease shareholders. Analysis of 250 large U.S. firms suggests that stock repurchase programs are variously a function of information asymmetry, risky stock-based incentives, and performance expectations.