CEO Behavior Research Articles

The determinants of high‐interest entrusted loans in China

AbstractWe examine the determinants of high‐interest entrusted loans in China from the perspective of corporate risk‐taking. The results of a baseline model illustrate that the propensity to offer high‐interest entrusted loans increases with loose monetary policies, corporate cash holdings and firm age, and it decreases with firm size and growth opportunity. These findings support the claim that firms offer high‐interest entrusted loans mainly for short‐term profits. Other determining factors include CEO behavior traits, market imperfections and the intensity of corporate governance. Specifically, market imperfections create an opportunity for risk‐taking while CEO behavior and the intensity of corporate governance affect a firm's tendency to take risk and engage in high‐interest entrusted loans.

How the CEO power and age dissimilarity shape the chair-CEO pay gap: Empirical evidence from China

Using data on China’s listed firms from 2009 to 2018, this paper investigates how the chair-CEO age dissimilarity and CEO power affect the chair-CEO pay gap from both managerial power theory and optimal contract theory. We find that CEO power and age dissimilarity have opposite effects on pay gap between the chairman and the CEO. And the cognitive conflict caused by age dissimilarity can effectively restrain the compensation-seeking behavior of CEO for non-performance compensation growth. More importantly, both the age difference and its sign have important value. When we consider age dissimilarity between the CEO and the entire board of directors, our hypotheses are still confirmed. Finally, we document that both CEO ability and co-working time between chairman and CEO could reduce the inhibition effect of age dissimilarity on compensation incentive from capability and relationship view. Overall, the results are beneficial to reform the top managers’ compensation incentive system and to improve the explicit and implicit supervision mechanisms.

Erratum

Previous articleNext article FreeErratumOriginal articleCEO Behavior and Firm PerformancePDFPDF PLUSFull Text Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinked InRedditEmailQR Code SectionsMoreThe order of authors for Bandiera et al., published in JPE’s April 2020 (vol. 128, no. 4) issue, is incorrect. The correct author order (and citation) is Oriana Bandiera, Stephen Hansen, Andrea Prat, and Raffaella Sadun, “CEO Behavior and Firm Performance,” Journal of Political Economy 128, no. 4 (April 2020): 1325–1369. https://doi.org/10.1086/705331. Previous articleNext article DetailsFiguresReferencesCited by Journal of Political Economy Volume 128, Number 5May 2020 Article DOIhttps://doi.org/10.1086/709252 HistoryPublished online April 15, 2020 © 2020 by The University of Chicago. All rights reserved.PDF download Crossref reports no articles citing this article.Related articlesCEO Behavior and Firm Performance19 Feb 2020Journal of Political Economy

Influence of Overconfidence and Cash Flow on Investment in Vietnam

CEOs Overconfidence can bring potentially risky early decisions to businesses, along with large enterprise free cash flow that can bring different investment decisions with CEOs Overconfidence. Especially in the context of Vietnamese enterprises, CEOs are often influenced by behavioral psychology about overconfidence in investment decisions (due to individual cultural characteristics as well as operating financial markets also depend on many factors outside the market). Therefore, the authors study the impact of overconfidence and cash flow on investment in Vietnamese to find the internal relationship between these three factors in the financial environment in Vietnam. With 480 companies listed on the Vietnam Stock Exchange from 2014 to 2018 (companies have continuous reports), the regression analysis results with panel data (FEM, GLS models, correction of robust and GMM dealing with endogenous problems) have shown Overconfidence has a positive impact on investment. At the same time, the results also indicated that enterprises with overconfident CEOs and large cash flows tend to invest less than enterprises with low cash flow. The results of this study have shown the behavioral behavior of CEOs in Vietnamese enterprises that exist under both prospect theory and effective market theory.

Do Overconfident CEOs Pay More to Shareholders? Evidence from the US Market

This paper aims to discover evidence on the possible impact of CEO overconfidence on payout policy, and the role ofcorporate boards in offsetting the possible negative effects of this overconfidence. Our investigation demonstrates theeffect of overconfidence on the choice of payout method, specifically regarding the repurchases-dividends mix. Wealso evaluate the ability of corporate governance mechanisms to reduce or even eliminate the negative effects of CEObehavior on payout decisions.This study is conducted using a sample of 671 non-financial companies from the US for the period of 2007–2016. Weapply probit regressions to study different aspects of payout decisions, and use a panel GMM estimator to check forpossible endogenous effects. Using a corporate governance quality index, we test the ability of boards of directors toreduce negative effects of CEO’s overconfidence on the payout decisions.Our findings confirm the hypothesis that overconfident CEOs tend to increase the levels of payout in the form ofrepurchases, while the levels of cash dividends are unaffected by this type of CEO behavior. Moreover, an overconfidentCEO is more likely to initiate repurchases if this has not been done already. The results further illustrate thatoverconfident CEOs not only pursue higher levels of repurchases, but also switch more often from cash dividends torepurchases. However, it is also shown, in contract to previous research in the field, that efficient boards of directors havevery limited power in eliminating the negative effects of CEO overconfidence.This paper contributes to the existing literature by analyzing the specific area of CEO overconfidence using data fromthe United States, and follows specific lines of inquiry which have not been deeply studied. Further possibilities toexplore the implications of this research exists particularly in the consideration of its apparent contradiction of previousresearch. There is yet scope to determine applicable tools of reducing the negative effects of specific CEO behaviors. It ispossible to identify and investigate other relevant behavioral characteristics that may influence payout decisions. Further,these characteristics may be evaluated to see if the operation of these interrelations reproduce alternative results in termsof the effect of corporate governance, both in the US and in other markets.

Do boards of directors affect CEO behavior? Evidence from payout decisions

In this article, we evaluate CEO behavior in terms of his or her preferences to risk, and how the actions of boards of directors interplay with these behaviors. Specifically, we set out to test whether the actions of boards of directors can overcome the negative impacts of CEO behavior on various aspects of payout policy. We set out to examine these tendencies in terms of the levels of payout, the propensity to pay, and the choice of payout channel utilized. We use several compensation-based proxies to measure CEO risk preferences on a sample of non-financial and non-utility companies from the US for 2007 to 2016 from the S&P 1500 Index. Our contribution is threefold. First, the findings fill the gaps in the research on the impact of CEO risk preferences on the decision to start paying dividends and on the decisions to switch between cash dividend and share repurchase. The results indicate that CEOs who are encouraged by the boards to take more risks paid out more through repurchases, while less risky CEOs are more likely to initiate paying dividends. Second, by means of quantile regression we demonstrate that the level of repurchases is more sensitive to the CEO’s risk preferences in the companies from top quartiles. Third, by introducing our index of corporate governance quality, we may document that corporate governance tools reduce or even eliminate the negative effects of CEO risk preferences. In companies with high corporate governance index, the risk preferences of the CEO do not affect payout decisions.

The unintended consequences of voluntary adoption of clawback provisions on managerial ability

AbstractI investigate the impact of the voluntary adoption of clawback provisions on managerial ability and predict that clawback provisions will motivate managers to exert more efforts following the adoption of clawback and these efforts will be in the form of an increased managerial efficiency. Using a propensity score matched sample of firms, I find a significant positive association between voluntary clawback adoption and the change in both rank and score of managerial ability. My study highlights the unintended consequences of clawback provisions on CEO's behavior and contributes to the on‐going debate on the importance of proactively and carefully drafting clawback policies, further signifying the importance of the SEC's efforts (Rule 10D‐1) to enforce clawback policies.

Is German Family Firm Performance Affected by CEO and TMT Behavior and Emotional Intelligence?

Members of top management teams (TMT) in family firms are often confronted with emotionally-loaded leadership because of having to include the interests of the owning family. Considering this emoti...

대학 최고경영자의 윤리적 리더십과 직무몰입이 업무성과와 조직시민행동에 미치는 영향에 관한 연구

The purpose of this study was to investigate the effects of ethical leadership and the job commitment on the job performance and the organizational citizenship behavior of university CEOs. In order to accomplish the purpose of this study, we conducted the independent variables of university CEOs ethical leadership such as the intent to act the ethical management, communication ability, ethical standard establishment, role model and ethics practice. In addition, we investigated the relationship between the job performance and the organizational citizenship behavior which is set by the job commitment as a parameter. The results of this study are as follows: First, the university CEO should identify the key factors for achieving university development and sustainable management through ethical leadership, and provide the criteria for the efforts and roles which are required by successful CEO. Second, in order to improve work performance and organizational citizenship behavior through the mediating effect of job commitment, the results of this study on ethical leadership and organizational effectiveness from the viewpoint of university management will show what the factors should be changed. In summary, the results of the study showed that the intent to act the ethical management, establishment of ethical standards, and the role model among the five factors of ethical leadership had a positive effect on the job commitment. The role model had the most influential variable, followed by the establishment of ethical standards and the intent to act the ethical management. In addition, the job commitment had a positive effect on job performance and organizational citizenship behavior, and job performance and organizational citizenship behavior increased as job commitment increased.

The Ethical Dimension of Equity Incentives: A Behavioral Agency Examination of Executive Compensation and Pension Funding

We draw on the behavioral agency model to explore the ethical consequences of CEO equity incentives. We argue that CEOs are more concerned with funding pension plans when they have more to gain from their stock options yet will increasingly underfund employee pension funds as their current option wealth increases. Our findings reveal that both effects hold when the CEO has greater power (also occupying board chair) over firm decision making. Our study suggests that there is an ethical dimension to equity incentives, given they are intended to align CEO interests with shareholders, yet potentially incentivize CEO behaviors with adverse consequences for employees. Insights from our findings provide boards and regulators with behavioral levers to protect employee well-being in the context of pension funding.

Модификация наночастиц оксида церия при облучении ускоренными электронами

AbstractThe luminescence and optical properties of ceria (CeO_2) nanoparticles irradiated by accelerated electrons with an energy of 10 MeV are investigated in this work. CeO_2 nanoparticles are prepared by the pulse electron evaporation of a ceramic target with vapor condensation of the evaporated material in a low-pressure gas on a NANOBIM-2 installation. The irradiation of CeO_2 nanopowders is found to cause the degradation of their luminescence and optical characteristics. The irradiation of a final aqueous suspension leads to the shift of a photoluminescence band toward the long wave range spectral range in comparison with the irradiation of a nanopowder. The catalytic-like behavior of CeO_2 nanoparticles interacting with hydrogen peroxide is analyzed, as well. Nanoparticles modified by the electron beam exhibit the deterioration of their enzyme-like activity.

Do Boards of Directors Affect CEO Behavior? Evidence from Payout Decisions

We test the ability of boards of directors to eliminate the negative impact of CEO behavior on payout policy. We contribute to the literature by testing the ability of boards to influence CEO payout propensity. First, we show that if the compensation scheme of a CEO does not stimulate him or her to take more risk, the level of payout will be higher. Second, by introducing an index of corporate governance quality we show that corporate governance tools may reduce the negative effects of CEO risk preferences: in companies with good corporate governance, the risk preferences of the CEO do not affect payout decisions. Third, based on a set of specifications for risk preferences, we show how the impact of CEO attitudes to risk influences the types of payouts.

Stock option pay versus restricted stock: A comparative analysis of their impact on managerial risk-taking and performance extremeness

This study investigates how two stock-based incentives affect the risk-taking behavior of CEOs. We compare stock options and restricted stock in terms of their impact on the magnitude of investments and performance extremeness. We test our hypotheses using data for 23 years starting from 1993 for a large sample of S&P 1500 firms. Our results indicate that both stock option and restricted stock pay increase the magnitude of investments undertaken by CEOs, but that stock options have a much stronger effect. Also, stock option pay increases the likelihood of both big gains and big losses, but restricted stock reduces the likelihood of big losses. Finally, we find that as CEO tenure increases, the effects of stock-based compensation tend to diminish. Therefore, stock-based incentives appear to be a useful solution to the agency problem for short-tenured CEOs, but much less so for long-tenured CEOs.

Ni-doped ceria nanorods for the WGS reaction: Effect of Ni distribution in methane suppression

• Ni-doped CeO 2 nanorods system exhibits great activity and selectivity toward WGS reaction. • Structure provides Ni δ + ( δ ≤ 2) into the (110) reactive ceria surface and well-dispersed Ni species interacting with the former. • The Ni distribution in the system enables the formation of formate intermediate species suppressing the non-desirable methanation route. Behavior of Ni-doped CeO 2 nanorods (NR-CeNiX) in WGS reaction is evaluated. The proposed novel system simultaneously exhibits reactive (110)-ceria facets and Ni substitution. Catalytic runs for WGS reaction show greater stability, activity and selectivity towards the shift reaction regarding the traditional Ni-supported (110)-ceria system. Analysis of the surface phenomena during the catalytic reaction, followed by in-situ DRIFTS, indicates a formate via mechanism where ceria-nickel interaction plays a key role in the suppression of methane formation. Further surface characterization by X-Ray photoelectron spectroscopy evidences the existence of low-coordination Ni at the ceria surface suggesting that Ni location is the reason for the improvement attained.

Managerial acquisitiveness and corporate tax avoidance

This paper draws on the “tone at the top” literature to investigate whether managers of firms with managerial acquisitiveness also engage in corporate tax avoidance. Using a sample of US observations, we find that there is a statistically significant association between firm acquisition decisions and corporate tax avoidance. This finding remains robust in a series of sensitivity tests including controlling for the CEO's involvement in hyping stocks. We also show that the effect of acquisitiveness on tax avoidance is more prevalent when audit quality is low, CEOs' equity compensation is low and/or increases in post-acquisition period, and when firms announce acquisitions which destroy shareholder wealth, suggesting opportunistic behavior of CEOs is a key driver of tax avoidance. This finding is consistent with the idea that managers of firms that make self-maximizing decisions at the cost of shareholders in the form of high M&A activities within a short period of time are also engaged in tax avoidance. Consistently, further analysis shows that when high acquisitive managers implement tax avoidance, they destroy firm value in the post-acquisition period.

Are All Interim CEOs Created Equal? Evidence from Investor Perceptions and CEO Behavior

I examine the market perception of different types of interim CEO successions as well as CEO behavior of different types of interim CEOs. Using a hand-collected dataset, I find that there are two types of interim CEOs: aspiring and place-holding. I find that the market perceives the appointment of place-holding interim CEOs as bad news and the appointment of aspiring interim CEOs as similar to the appointment of permanent CEOs. I further study actions taken by interim CEOs and do not find evidence that aspiring interim CEOs act myopically. Rather they appear to invest more in discretionary expenses, such as research and development, which suggests that they focus on increasing long-term shareholder value. Thus, market expectations of aspiring interim CEOs are in line with CEO behavior. In addition, analysis of CEO effort suggests that place-holding interim CEOs exert less effort than permanent CEOs. Specifically, I find preliminary evidence that they issue less accurate forecasts. Overall, this paper provides initial evidence consistent with career concerns of interim CEOs resulting in different CEO behavior.

Real or Shadow Options? The Influence of CEO Overconfidence and Exploration on CVC Investments

We utilize Corporate Venture Capital (CVC) investments to investigate the behavior of overconfident CEOs during the real option identification process. The study theoretically argues a negative rel...

The CEO Horizon Problem and Managerial Slack in China

ABSTRACTThis study investigates how CEO behavior and incentives change during the CEO's final years in office, known as the horizon problem. We examine how the horizon problem alters managerial slack, a measure of operational inefficiency and managerial value diversion. Using data on Chinese publicly traded firms between 2003 and 2011, we find that managerial slack increases in the last two years of CEO tenure compared to earlier years. We also show that the increase in managerial slack in CEO final years in office is smaller in privately controlled firms than in state-owned enterprises, smaller in firms with CEO equity ownership and more independent boards compared to those without. We conclude that higher quality corporate governance mechanisms ameliorate the perverse incentives associated with the CEO horizon problem, and reduce CEOs’ tendency to increase managerial slack during their final years in office.

An Empirical Study on the Effects of Career Ambition and Self-Compassion on Innovation Work Behavior of CEOs and Executives of SMEs

An Empirical Study on the Effects of Career Ambition and Self-Compassion on Innovation Work Behavior of CEOs and Executives of SMEs

CEO turnover and the new leader propensity to open innovation

PurposeIn an increasingly turbulent and competitive environment, open innovation could be critical for a firm’s success, favoring organizational flexibility and accelerating innovation processes. However, sharing innovation projects with external partners often requires changes in traditional organizational behavior and visions of CEOs. The purpose of this paper is to theorize and empirically verify how the CEO turnover and some socially relevant characteristics of the old and the new CEO may impact firms’ propensity toward open innovation under an integrated agency-resource dependence view and social identity perspective.Design/methodology/approachThe empirical analysis was carried out on 264 companies drawn from 16 developed European markets included in the S&P Europe 350 Dow Jones index over the years 2006-2015. To test the predictions, the authors adopted regression analysis by employing the panel two-stages least squares model and the ordinary least squares econometric model.FindingsConsistently with the predictions, the authors found that CEO turnover stimulates open innovation. Particularly, the results suggest that the organizational identity rationale may motivate a divergent propensity between insider and outsider new CEOs, with outsiders more prone to open innovation. The higher tendency of new outsider CEOs to undertake innovation projects jointly with external organizations prevails also within firms that experienced a long tenure of the former CEO, thereby suggesting that a new outsider CEO appears able to renovate corporate strategic directions also in highly orthodox organizational cultures.Originality/valueTo the best of the authors’ knowledge, this is the first study that theorizes why CEO turnover might impact the propensity of the firm toward open innovation. The authors use an integrated agency-resource dependence perspective, and the results from the empirical analysis mostly support the predictions. Moreover, the authors adopt the social identity theory to show that the organizational identification of the CEO matters in the decision of engaging in open innovation.