CEO Career Horizon Research Articles

Conformity or differentiation? The role of CEO turnover

This study investigates the nexus between CEO turnover and corporate social responsibility (CSR) practices using all US-listed companies as the sample. Considering each company's different fields in the CSR practice, we use conformity and differentiation to quantify the CSR practice. Our generalized difference-in-difference method shows that incoming CEOs can positively impact differentiation and negatively affect conformity. Our empirical evidence further indicates that CEO career horizon and compensation structure are the two potential mechanisms through which CEO turnover affects the CSR practice. Our results provide insightful implications for companies that wish to gain a competitive advantage via the CSR practice.

Slowing down in the final lap: investigating the effect of CEO career horizon on green innovation in China

Slowing down in the final lap: investigating the effect of CEO career horizon on green innovation in China

From dawn to dusk: The relationship between CEO career horizon and ESG engagement

This study investigates the influence of a CEO's career horizon on a firm's engagement in ESG. Given the private benefits which CEOs can extract from this strategy, we argue that a firm's willingness to pursue additional ESG efforts is likely to mirror CEOs' desire to strengthen their personal reputation and curb their perceived risk exposure at each stage of their career horizon. Drawing on the prospect theory, we theorize the decomposition of CEOs' career horizon into two counteracting forces (career concerns and legacy concerns) to explain how a CEO's effort in ESG could change depending on the length of the horizon and the influence of a reference point, such as their firm's performance relative to the industry benchmark. Using a sample of European listed companies from 2007 to 2018, our evidence supports an inverted U-shaped relationship between CEO career horizon and a firm's ESG engagement. This result shows the importance of a CEO's eagerness for personal reputation as a key antecedent of companies' ESG actions. However, a CEO's perceived risk exposure proves not to be a relevant driver of ESG, since we find that such a relationship is not sensitive to decision framing based on relative performance.

CEO career horizons, foreign experience, and state ownership impact on the adoption of the Global Reporting Initiative standards for corporate social responsibility reporting

AbstractThis study investigates the influence of chief executive officers' (CEOs) career horizon on the adoption of Global Reporting Initiative (GRI) standards for corporate social responsibility (CSR) reporting. Using data from A‐share Chinese listed firms on the Shanghai and Shenzhen stock exchanges from 2010 to 2020, we employ logistic regression analysis to examine the empirical relationship. Our findings indicate that companies led by CEOs with shorter career horizons (older CEOs) are less inclined to adopt GRI reporting standards for CSR reporting. This association is particularly pronounced in non‐state‐owned enterprises compared to state‐owned enterprises. Additionally, we observe a weaker relationship between CEO career horizon and GRI adoption when the CEO possesses foreign experience. These results remain robust across various measures of CEO career horizons and econometric methodologies as well. The implications of our findings are significant for understanding the development and implementation of GRI standards for CSR reporting, particularly within the context of China.

The Effect of CEO Career Horizon on Voluntary Corporate Social Responsibility (CSR) Disclosure Decisions

The Effect of CEO Career Horizon on Voluntary Corporate Social Responsibility (CSR) Disclosure Decisions

CEO career horizon and corporate bribery: a strategic relationship perspective

CEO career horizon and corporate bribery: a strategic relationship perspective

CEO's Childhood Experience of Natural Disaster and CSR Activities.

Interest in the drivers of firms' corporate social responsibility (CSR) is growing. However, little is known about the influence of a CEO's childhood experience of natural disasters on CSR. Using archival data, we explore this relationship by offering three mechanisms that may account for how the CEO's childhood experience of natural disaster is related to their CSR. More specifically, while prior research has established a positive relationship based on the post-traumatic growth theory, we show that the dual mechanisms of prosocial values and a CEO's risk aversion explain the positive relationship. We further find that the positive relationship is stronger (1) when CEOs have longer career horizons and (2) when community social capital is high. This study contributes to both research and managerial implications on the topics of CEO's childhood experience and CSR. In particular, this study advances the upper echelon theory by revealing that a CEO's childhood experience of natural disaster is a useful yet relatively underexplored variable that can help explain the substantial variations in firms' CSR. Moreover, we emphasize that a CEO's career horizons and level of community social capital are important variables that further amplify the effect of a CEO's childhood experience of natural disaster on the firm's CSR commitment.

CEO Career Horizon, CEO Power, Corporate Governance and Earnings Quality: Evidence from Egypt

CEO Career Horizon, CEO Power, Corporate Governance and Earnings Quality: Evidence from Egypt

CEOs’ regulatory focus and firm internationalization: The moderating effects of CEO overconfidence, narcissism and career horizon

While the international business literature has mainly focused on the firm- or industry-level antecedents of internationalization strategies, scholars have recently advocated a greater focus on the microfoundations of firms’ strategic decisions. Building on the regulatory focus theory, this study focuses on how CEO promotion and prevention foci impact firm internationalization. Looking into dispositional and situational attributions, this study also theorizes how these factors moderate the relationship between a CEO’s psychological motivations and firm internationalization. Using data from publicly traded US firms listed in the Fortune 500, the findings of this study show that a CEO’s promotion focus is positively associated with the extent of a firm’s internationalization, whereas a CEO’s strong prevention focus limits the extent of a firm’s internationalization. The findings also reveal that the relationship between a CEO’s regulatory focus and the extent of a firm’s internationalization is moderated by a CEO’s overconfidence, narcissism, and career horizon. These findings have important research and managerial implications for firms engaged in international business.

CEO career horizon influence strategic novelty of a firm: A study under the boundary condition of CEO's temporal focus

AbstractThe paper examines the relationship between CEO career horizon and strategic novelty under boundary conditions of CEOs' temporal focus for firms in one of the emerging markets. Upper echelons theory predicts that CEOs' risk aggressiveness decreases with diminishing career horizons. Therefore, CEOs nearing retirement are less likely to make novel strategic investments. We assert that CEOs' career horizon influences strategic outcomes, especially risk aggressive strategic novelty outcomes contingent on the CEOs' temporal perspective, i.e., past and future temporal focus. We test the hypotheses using archival data from 285 listed firms in India. The findings support the hypotheses by showing that CEOs' carrier horizon positively influences strategic dynamism and distinctiveness, the two dimensions of strategic novelty. The results also suggest that past temporal focus enhances the negative influence of decreasing CEOs' career horizons on strategic dynamism and distinctiveness. Future temporal focus, on the contrary, diminishes the negative influence of decreasing CEOs' career horizons on strategic dynamism and distinctiveness. The findings contribute to understanding the joint role of the time static trait of CEOs, i.e., temporal focus, and time-varying trait, i.e., career horizon on strategic novelty.

CEO Career Horizon and Corporate Social Responsibility Assurance

ABSTRACT Framing on the premise of upper echelons theory, this study explores the relationship between a chief executive officer’s career horizon and corporate social responsibility assurance in an emerging market. Using a 9-year (2010–2018) unique sample of A-share listed firms in China, we found that the chief executive officer’s age is an important determinant of corporate social responsibility assurance and is significantly negatively associated with corporate social responsibility assurance, indicating that the chief executive officer’s age increase experienced a significant decline in corporate social responsibility assurance. These findings are consistent with our expectation that as CEOs grow older their rigidity increase with their age and this cause to decrease their interest to engage in corporate social responsibility assurance. Further, the negative relationship between the chief executive officer’s age and corporate social responsibility assurance is significantly positively moderated by both state-owned enterprises and heavily polluted firms. Our results contribute to the existing literature and have implications for potential policymakers.

Pressure to perform: female CEOs and firm community engagement

PurposeThis study examines the impact of female CEO on firm community engagement. By drawing on the stakeholder-agency paradigm, the author proposes that female CEOs feel more pressure to deliver favorable firm performance, thus resulting in less community engagement in firms with female CEOs. The author also examines circumstances surrounding the CEO as boundary conditions that can promote the extent that female CEOs engage in community initiatives.Design/methodology/approachThe author collected panel data on a sample of firms listed in the S&P 500 index during the years 2009–2013. The author tested the hypotheses using firm fixed-effects models.FindingsThe results show that firms with female CEOs pursue less community engagement. CEO career horizon and CEO unexercisable stock options are boundary conditions that weaken the negative relationship between female CEOs and community engagement, while board independence does not have a significant moderating effect.Originality/valueThis study sheds light on the roles of female CEOs on firm community engagement as a distinct firm strategic action. Furthermore, this study provides a better understanding of the relationship by examining different factors that can promote community engagement by female CEOs, which include CEO career horizon and compensation incentive.

Is bribery a managerial myopia? A denial from the perspective of CEO career horizon

As bribery costs and pays, it can be considered as a corporate investment that relies on time horizon. We follow this logic and investigate the impact of CEO career horizon on corporate bribery. While most research tends to believe that bribery is an opportunistic behavior that is short-term oriented, bribery may be implemented as a relational strategy with long-term incentives in emerging markets. As such, CEOs with longer rather than shorter career horizons are prone to make bribery investment because they are able to achieve paybacks during their incumbency. Testing the hypothesis on a sample of 2,915 Chinese listed companies during the period from 2010 to 2018, we find that CEOs with longer career horizons are more likely to engage in corruption. Further, this relationship is weaker for state-owned companies and companies in more market-oriented regions.

Buying Legacy? How CEO Career Horizon Impacts Employee Wages

Buying Legacy? How CEO Career Horizon Impacts Employee Wages

Does Options Trading Affect Managerial Incentives in Corporate Social Responsibility Investment?

We posit that active options trading provides managerial incentives to invest in corporate social responsibility (CSR) because managers can better hedge the downside risks of long-term and uncertain CSR investment. Our results show that firms with more options trading have better CSR performance. We also find stronger results for firms with more product market competition, larger takeover risks, shorter CEO career horizon, and higher reputation and goodwill. We use a quasi-natural experiment that reduces options trading costs for treated firms to address endogeneity concerns. A subsample analysis of insider hedging transactions corroborates our main findings. Overall, we provide the first evidence that active derivative markets have real effects on firms’ CSR performance.

Reductions in CEO career horizons and corporate policies

We provide evidence on the effect of personal shocks that reduce a CEO's expected career horizon on corporate policies. The timing of these events is not predictable based on observable characteristics, and affected CEOs experience greater turnover rates and shorter residual time-in-office. Following the shock, these firms moderate both R&D and capital expenditures and increase cash distributions. While these changes are consistent with greater short-term orientation, they are not detrimental to shareholders, as performance increases after the shock. Earnings management and firm risk remain unchanged, while both CEO total compensation and equity-based compensation decline. Overall, our results indicates that the improved performance comes from the implementation of more efficient firm policies, likely driven by an internal tournament effect after the shock rather than from opportunistic behavior.

Does CEO myopia impede growth opportunities?

We present evidence that the negative impact of CEO short-termism on firm value can be attributed to a sub-optimal exercise of real options. Accordingly, the value relevance of firms’ real options portfolios is maximized in the absence of CEO temporal myopia. Moreover, the impact of real options on firms’ stock returns’ idiosyncratic characteristics is more pronounced when CEOs’ decision horizons are longer, in line with the view that enhanced operating flexibility from longer decision horizons can amplify the convexity of real options’ payoffs. These findings have important implications regarding the impact of CEO career horizons on corporate strategies and board decisions related to CEO incentives and succession.

“Accelerating” and “jumping” internationalization

PurposeIn recent years, the phenomena of “accelerating” and “jumping” during the international expansion of Chinese enterprises have attracted a lot of attention from scholars. However, while a CEO’s career horizon can significantly affect his or her enterprise’s strategic decision-making, few studies have explored the role of CEO career horizon in terms of “accelerating” and “jumping” internationalization.Design/methodology/approachBased on a sample of China’s A-share listed manufacturing companies from 2008 to 2017, this study explores the impact of CEO career horizon on the internationalization pace and international rhythm of enterprises.FindingsFirst, the shorter the CEO’s career horizon, the more likely the CEO can avoid risky strategic decisions, which ultimately causes a negative relationship between CEO career horizon and the internationalization pace and rhythm of the enterprise. Second, for larger and older boards of directors, there is a more negative impact of the CEO’s short-term career horizon on the internationalization pace and internationalization rhythm of the company. However, given a larger proportion of female directors and non-executive directors, the CEO’s short-term career horizon has a weaker negative impact on international pace and the rhythm of internationalization.Originality/valueFirst, based on upper echelon theory, this study interprets the influence of CEO career horizon on the time dimension of corporate internationalization (including internationalization pace and international rhythm), deepening the theory’s explanatory power. Second, by clarifying the important predictive effect of CEO career horizon on internationalization pace and international rhythm, this research enriches extant research on both variables’ antecedents, as well as that on the influence of CEO career horizon. Finally, by introducing the regulatory role of the board’s supervisory ability, this study clarifies the boundary conditions for the influence of the CEO’s career horizon on international pace and rhythm, and it expands the literature on how CEOs and boards of directors can influence corporate strategic decisions during the internationalization process.

CEO career horizon, corporate governance, and real options: The role of economic short‐termism

Research Summary: Combining studies on real options theory and economic short‐termism, we propose that, depending on CEOs’ career horizons, CEOs have heterogeneous interests in strategic flexibility, and thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long‐term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self‐seeking behavior will impact real options investments.Managerial Summary: This article helps to explain how a CEO's self seeking‐behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms’ real options, which should lower the investments in the firms’ real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long‐term incentives and institutional investors.

Bowman's risk-return paradox: An agency theory perspective

The negative association between risk and return is paradoxical because risk-averse managers should only expose themselves to higher risk for higher returns. The paradox is resolved, however, if we recognize that risk-averse managers may be taking decisions that pose risk for shareholders and not for their own careers. We draw on the career concerns literature to explain why decisions that pose risk to shareholder returns can enhance managerial careers. We provide evidence that the risk-return paradox is exacerbated by agency problems that contribute to career concerns (i.e., CEO career horizon), and mitigated by various governance mechanisms that curb the agency problem by aligning managers with shareholders (such as monitoring by the market for corporate control, large block owners, institutional owners, vigilant board, and CEO incentive alignment). Our study sheds light on the role of career concerns and corporate governance in resolving the risk-return paradox.