CEO Influence Research Articles

President Trump vs. CEOs: a comparison of presidential and corporate agenda building

ABSTRACT The purpose of this study was to compare the agenda-building influence of President Trump and CEOs in communicating about a number of political and social issues. Through a content analysis of the president’s (N = 63) and business leaders’ (N = 234) information subsidies and news coverage (N = 270), evidence was found repeatedly supporting the president’s first, second, and third levels of agenda-building influence on news media content. In comparison, CEOs’ agenda-building influence was found at the first and third levels, and this influence was not consistent across issues. Furthermore, an argument was made in light of the study’s findings that direct communication by business leaders generally had a more significant impact on the media agenda than indirect messages from other organizational actors such as their companies or corporate spokespeople.

Overconfident CEOs, decentralisation, and tax aggressiveness: evidence from Japan

This study investigates the relationship between chief executive officers' (CEO) overconfidence and tax avoidance, and the process through which the influence of CEOs' overconfidence propagates to subsidiaries and affiliates. To estimate CEOs' overconfidence, this study focuses on Japanese management forecasts, which are disclosed by most companies in Japan. This approach allows mitigating sample selection bias. The study's results indicate that: 1) companies with overconfident CEOs engage in more aggressive tax avoidance; 2) the influence of CEOs' overconfidence is more pronounced in parent companies directly operated by CEOs. These trends are more pronounced when CEOs are overconfident regarding specific information and are also observed when the analysis accounts for factors related to corporate governance. The study's findings suggest that the nature of manager has a substantial impact on corporate tax planning, and such impact is more likely to spread in organisations closer to the CEO.

Testing the demand for monitoring and advisory roles of independent directors: a case of Indian corporate boards

Research on Indian corporate governance has been largely relied on the monitoring role of corporate boards and thus, is devoid of another important role, i.e., advisory role performed by them. The present analysis makes an endeavour to fill the research gap of testing simultaneously the relevance of monitoring and advisory roles of corporate boards by specifically focusing on investigating the linkages between several firm specific factors (firm complexity, monitoring and advising costs, private benefits, CEO influence) and board independence. Overall the analysis maintains that board independence is significantly determined by the level of firm complexity and private benefits in the directions consistent with the past literature. However, the findings of monitoring and advising costs, and CEO influence hypotheses are opposite to the expectations derived from the concerned literature. These variations can be attributed to unique environment and different institutional contexts under which the firms are operated.

CEO Influence on Funds from Operations (FFO) Adjustment for Real Estate Investment Trusts (REITs)

This paper investigates non-GAAP performance measures of the REIT industry, specifically the difference (FFO adjustment) between concurrent FFO and Net Income (NI). Using the U.S. Equity REIT data from 1993 to 2018, we first find evidence that both NI and FFO are associated with REIT market-adjusted stock returns, suggesting both contain information that is valuable to investors. Second, we document a significant and positive relationship between contemporaneous FFO adjustment and NI, indicating a possible “selective” and “intentional” inclusion and/or omission of the “good” vs. “bad” news in the FFO reporting. Third, we find direct evidence that more powerful CEOs are indeed associated with higher FFO adjustments, suggesting CEOs’ involvement in hiding subpar performance. Finally, we focus our attention in a more recent period, when the National Association of Real Estate Investment Trusts (NAREIT) provides additional clarifications and guidelines, and the U.S. Securities and Exchange Commission (SEC) increases scrutiny on FFO reporting. Our results show a diminished “manipulation” for the majority of the REITs, suggesting these guidelines and scrutiny have achieved the intended purposes. While non-GAAP performance measures might supply additional information to investors, our results indicate that providing continuous guidance and monitoring is essential.

Результативность управления и роль генерального директора компании

Результативность управления и роль генерального директора компании

Influence of CEO Characteristics on Accounting Information Disclosure Quality—Based on the Mediating Effect of Capital Structure

ABSTRACTTaking the A-share listed companies of the Shenzhen Stock Exchange in 2012–2017 as a sample and capital structure as a moderator variable, this paper uses a mediating effect model to investigate the mechanism of influence of CEO characteristics on accounting information disclosure quality (IDQ). According to our findings, female CEOs and CEO’s educational level negatively influence IDQ, while CEO’s wage level and the separation between CEO and chairman positively influence IDQ. CEO’s educational level positively influences the capital structure; CEO’s wage level and the separation between CEO and chairman negatively influence the capital structure, while female CEOs have a non-significant influence on it. Further investigation reveals that, in the mechanism of influence of female CEOs on IDQ, and the influence of CEO’s educational level on IDQ, capital structure exerts no mediating effect; and that, in the mechanisms of influence of CEO’s wage level, and the separation between CEO and chairman on IDQ, capital structure exerts a partial mediating effect. On this basis, this paper offers methodological inspiration and theoretical support to perfect the governance of Chinese listed companies and regulate their market behaviors.

CEO scanning behaviors, self-efficacy, and SME innovation and performance: An examination within a declining industry

ABSTRACTStudying the CEOs of small and medium enterprises (SMEs) in the US metalcasting industry—an industry that has been steadily declining for several years—we develop a theoretical model to examine how CEO scanning behaviors in the form of scanning intensity and proactiveness influence self-efficacy, which in turn influences firm innovation and performance. We extend theory and research by (a) demonstrating of the role and influence of SME CEOs over firm innovation and performance in declining industries, (b) illustrating how scanning provides social learning opportunities for CEOs that enhance their levels of self-efficacy, and (c) showing that self-efficacy mediates the effects of scanning on firm innovation and performance.

Corporate Sustainability and CEO–Employee Pay Gap—Buster or Booster?

There is a general agreement that extensive remuneration gaps may cause pressing environmental, social, and economic problems. Thus, a critical question to be answered is what is the effect of being at the forefront of corporate sustainability on the CEO–employee pay gap. This paper addresses the question by examining empirical evidence from 415 constituents of the S&P 1500 index over the years 2006–2016. For the above period, we found a positive relationship between a strong commitment to sustainable development at the firm level and the CEO–employee pay differential. Additionally, firms characterized by higher performance, growth potential, and financial robustness constituted more dispersed salary distribution environments. The findings also suggest that CEO gender has a significant effect on the pay gap with a moderating influence of female CEOs. The paper contributes to the literature by shedding additional light on the urgent need for the implementation of a limit capping the CEO–worker pay ratio at a certain, responsible level as one of screening criteria used by sustainability ranking providers. Furthermore, it also shows that leading corporations in the area of sustainability do not implement any serious solutions in the above area on their own accord.

Does Independent Advice to the Board Affect CEO Compensation?

This paper investigates the role external advice plays in the board’s determination of CEO compensation. Specifically, I examine whether the Pay-Performance Sensitivity and the Relative Performance Evaluation component of a CEO’s contract increase with the degree of compensation consultant independence. I use a unique sample of Canadian firms which allows me to directly measure the impact of non-compensation related consulting fees on compensation advice. For identification, I exploit a 'quasi-natural experiment' provided by the creation of an independent consultant as a spin-off from an affiliated consultant. Switching to an independent consultant is associated with relative increases of 22% in Pay-Performance Sensitivity and 28% in Relative Performance Evaluation of CEO contracts. Despite the benefits of independent advice, independent consultants may not be hired due to higher fees, the influence of powerful CEOs, or because boards already possess adequate expertise.

Does Audit Committee Accounting Expertise Help to Promote Audit Quality? Evidence from Auditor Reporting of Internal Control Weaknesses

ABSTRACTIn this study, we examine whether audit committee accounting expertise helps to promote audit quality by motivating auditors to conduct diligent internal control audits and make appropriate internal control assessments because audit committee accounting expertise safeguards auditors from dismissal following adverse internal control opinions. Among clients with existing and likely internal control material weaknesses (as proxied by future restatements of audited financial statements), we find a greater likelihood of adverse internal control audit opinions when the audit committee has greater accounting expertise (measured by the proportion of accounting experts on the audit committee). Among all clients, we find a lower likelihood of subsequent auditor dismissal following an adverse internal control audit opinion when the audit committee has greater accounting expertise. In further analyses, we find that this lower likelihood of subsequent auditor dismissal occurs when at least two audit committee members possess accounting expertise. We also find some evidence that CFO influence (but not CEO influence) over the audit committee negates the increased likelihood of adverse internal control opinions when internal control material weaknesses likely exist, as well as the decreased likelihood of auditor dismissal following adverse internal control opinions. These findings have important implications for regulators and corporate nominating committees interested in promoting audit committee effectiveness.

Seeking pleasure or avoiding pain: Influence of CEO regulatory focus on firms' advertising, R&D, and marketing controversies

This research examines the influence of CEOs' regulatory focus on firms' strategic marketing behavior. The authors propose that the degree of CEOs' promotion focus relative to their prevention focus positively impacts firms' advertising and R&D intensities. However, the authors also propose a dark side of predominantly promotion-focused CEOs: a higher likelihood of firms getting involved in marketing controversies. The impact of CEO regulatory focus on these outcomes is proposed to be magnified when CEOs have high power, when stock options comprise a small proportion of CEOs' compensation, and when firms operate in highly dynamic environments. Findings based on observing a sample of publicly listed U.S. firms between 2006 and 2010 provide considerable support for the authors' hypotheses. These findings have important implications for managers, board members, investors, and researchers interested in the determinants of and mechanisms to prevent marketing myopia and marketing controversies.

The influence of CEOs’ equity-based compensation on restaurant firms’ CSR initiatives

PurposeBased on the agency theory and risk management perspective, this study aims to examine the relationship between CEOs’ pay schemes and corporate social responsibility (CSR) activities in the restaurant industry. Specifically, the authors propose that CEOs with a higher proportion of equity-based compensation (EBC), which induces a greater propensity for risk-taking, are prone to indulge less in CSR. In addition, the authors investigate how institutional ownership moderates the proposed main relationship.Design/methodology/approachThis study performs two-way fixed-effects models and clustered standard errors to test the proposed hypotheses.FindingsThe results of the panel analysis show a significant negative effect of CEOs’ EBC on CSR. Also, the authors found a significant positive moderating effect of institutional ownership between CEOs’ EBC and CSR.Originality/valueGiven the lack of empirical studies that incorporate both agency theory and the risk management perspective, and given the importance of understanding the determinants of restaurant firms’ CSR activities, this study expands upon the existing literature by showing the relationship between CEOs’ compensation schemes and restaurant firms’ CSR activities.

CEO Food Culture and Corporate Innovation

We analyze the effect of CEO food culture on corporate innovation using a sample of Chinese listed firms from 2000 to 2016. We extend benign masochism and behavioral consistency theories to determine that a CEO with Szechuan cuisine food culture is positively associated with corporate innovation. The influence of CEOs’ food culture and overseas experience on firm innovation are substitutes to each other. CEO food culture matters in state-owned enterprises (SOEs) than in non-SOEs. CEOs’ Szechuan cuisine food culture also increases the volatility of firm performance.

Do CEOs' personal donations matter? The impact of the CEO's personal donations on consumers' attitudes toward his/her company in China

Although numerous studies have confirmed the positive link between corporate donations and consumers' attitudes toward companies, the influence of CEOs' personal donations on consumers' attitudes toward companies remains unknown. This paper addresses this gap in the Chinese context. The results from three studies show that a CEO's personal donations may influence consumers' attitude toward the CEO's company, and this influence is stronger than the influence of the company's donation. CEO type moderates the influence. Furthermore, there is an interactive effect between the CEO's donation and his/her company's donation on consumers' attitude toward the company. Consumers tend to have more positive attitudes toward a company when the CEO donates but the company does not than when the CEO does not donate but the company does. Such effects are moderated by consumers' thinking style. Our studies provide implications for companies seeking to strengthen their market position through CSR in the Chinese market.

Beyond Independence: CEO Influence and the Internal Operations of the Board

Using a detailed dataset on the meeting sub-structure of the board, this paper investigates the time trends and cross-sectional determinants of internal boardroom control. First, I document that the principal governance reform following Sarbanes–Oxley was the removal of the CEO as a participating member in board monitoring and investment decisions. Consistent with this being against the preferences of the average CEO, I find that CEO power is negatively related to monitoring work handled outside of the CEO’s presence and positively related to board-time spent in the executive committee. Together the results highlight internal operations as governance concerns of the modern board.

Surprises of corporate governance and Russian firms debt

Our paper investigates the effects of corporate governance features on the cost of publicly traded debt in the Russian market after the global financial crisis. We consider a wide range of corporate governance mechanisms and focus our analysis on three elements relevant for emerging capital markets: state-owned bond issuers, auditor power (Big 4 or local firms) and CEO power. As control variables, we consider financial and non-financial indicators of bond issuers, including proxies of intellectual capital and transparency indicators, characteristics of bond issues, structure and size of the Board of Directors. We apply linear and multiplication regressions for unbalanced panel data.The original result is that, in the case of a sole executive body, bond spreads are higher. We find an inverse relation between the ex-post cost of public debt and audit power. The analysis also revealed a robust result that disclosing information on intangible assets and a larger Board of Directors reduce debtholder risks. According to our findings, debtholders take into account the risk of the influence of CEOs of large companies on local auditors, while for international auditors such influence is less possible. These results are robust to a large set of firm-specific and bond- specific characteristics.

Who Is More Likely to Take Precautions: A Research on CEOs’ Characteristics and the Strategic Choice of Derivatives

Deepening the marketization reform of interest rate and exchange rate provides conditions for the steady development of interest rate and exchange rate markets, but it objectively requires enterprises to strengthen the management and prevention of risks. At the same time, the development of financial derivative markets prompts enterprises to increase the use of derivative products, and the understanding of derivative products gradually returns to the micro-financial nature of risk management in domestics. Since the Upper Echelons Theory” is proposed, more and more scholars have used different personal characteristics of managers to explain the heterogeneity of enterprise decision-making. Therefore, it is inevitable to analyze the personal characteristics of managers to explore the strategic choice of enterprise derivative products. Who would choose financial derivatives to avoid suffering the uncertainty of the future development of enterprises? This paper uses the derivative as an alternative variable to reflect the risk aversion of the CEO, and establishes the logical connection between the individual characteristics and decision-making behaviors of enterprise managers and derivative risk management. Based on the sample of A-share listed firms between 2013 and 2016 in China, this paper attempts to study the influence of CEOs’ characteristics on the choice of derivative strategies by using Logit Model and Multi-value selection models. We make the following conclusions. Corporate risk management strategies contain the preferences of management. These preferences are shaped by both the personal nature of CEOs and external environments. Female, maintaining the advantage of salary and the sense of pride largely determine the choice of financial derivative strategies of CEOs. Caution, retaining existing pay advantages and focusing on their own reputation encourage CEOs to make risk-averse corporate decisions. Meanwhile, the abilities and levels of management, new officials or not and the differences of enterprise property which are formed by learning will result in the differences of the enterprise risk aversion strategy choices. Managers who have strong abilities will choose to use derivative products which will hedge risks for the sake of the sustainable development of enterprises. However, enterprises without the change of CEOs are more risk averse than those with the change of CEOs. A new official applies strict measures, so new CEOs prefer risks to fight for the performance. This study breaks through the existing understanding of the traditional use of derivative products, expands the existing research paradigm of previous CEOs’ characteristics and risk preference, and enriches the Upper Echelons Theory”. It also provides a theoretical basis for understanding and explaining the micro behavior of Chinese enterprises which are using financial derivatives to avoid risks.

Drilled to obey? Ex‐military CEOs and financial misconduct

Research Summary: We examine the influence of CEOs' military background on financial misconduct using two distinctive datasets. First, we make use of accounting and auditing enforcement releases (AAER) issued by the U.S. Securities and Exchange Commission (SEC), which contain intentional and substantial cases of financial fraud. Second, we use a dataset of “lucky grants,” which provide a measure of the likelihood of grant dates of CEOs' stock options having been manipulated. Results for both datasets indicate that CEOs who served in the military are less inclined to be involved in fraudulent financial reporting and to backdate stock options. In addition, we find that these relationships are moderated by board oversight (CEO duality and independent directors in the board).Managerial Summary: CEOs who formerly served in the U.S. military are prevalent among U.S. firms. The military puts strong emphasis on the obedience of its personnel. In this study, we test if time spent in the military leads individuals to be more obedient to rules and regulations in the years after they have left the military and become CEOs. Our findings strongly suggest that CEOs who served in the U.S. military are less likely to be involved in financial misconduct. We also find evidence that tougher board oversight strengthens this relationship. Our findings have implications for regulators, auditors, practitioners, and researchers who are interested in determinants of and mechanisms to prevent fraud and stock option backdating.

Retrenchment Strategies and Family Involvement: The Role of Survival Risk

This article analyzes retrenchment strategies that family businesses adopt during periods of crisis. From a socioemotional wealth perspective, we propose that the influence of family board members and family CEOs on retrenchment depends on survival risk. We collected empirical data from companies on the Spanish Stock Exchange (2008-2012). Our findings reveal that family involvement intensifies retrenchment when performance is declining, and that retrenchment intensifies when survival is at risk. We also demonstrate that family firms are able to implement retrenchment measures when required to improve their performance.

Organizational Social Capital: Ties Between HRD, Employee Voice, and CEOs

Growing employee voice increases the likelihood that employees will engage in discretionary efforts to share potentially useful information, express opinions, or concerns about work-related issues to their supervisors and other leaders in the organization. We develop a conceptual model and a series of propositions to examine and analyze the underlying mechanisms that enhance employee voice. Specifically, we identify linkages and connections between human resource development (HRD) practices, organizational social capital (OSC), and the role of CEOs as facilitating environmental or situational mechanisms that have implications on voice behavior. HRD can play a key role in helping employees foster social capital, leading to employee voice in the organization. When CEOs extend their existing internal social networks, and engage in conversations with workers, this dialogue serves as a visible artifact and reverberates across the organization. Our propositions move beyond framing employee-related voice outcomes as a result of either HRD practices or CEO influence. Rather, we postulate an outcome of their interdependent interactions. Implications for HRD research and practice are discussed.