Level Of Managerial Discretion Research Articles

Executive Attention Breadth and Rival Competitive Action: A Rivalrous View of Executive Attention

Drawing on the attention-based view and the awareness-motivation-capability framework in competitive dynamics, this study provides a theoretical framework linking a focal firm’s public display of wide executive attention breadth to a rival’s subsequent volume of competitive actions. We argue that a wide executive attention breadth at the focal firm may motivate the rival into more aggressive attacks. We also argue that the focal firm’s level of managerial discretion will moderate the impact of its executive attention breadth on a rival’s competitive actions. Based on a unique sample of competitor dyads from duopoly industries composed of S&P 1,500 firms, we found a positive association between a focal firm’s executive attention breadth and a rival’s subsequent volume of competitive actions. We also found that when the focal firm had high media coverage, an indicator of reduced managerial discretion, the impact of its executive attention breadth on the rival’s action volume became stronger; whereas, when the focal firm had high market dominance, an indicator of increased managerial discretion, the impact of its executive attention breadth on the rival’s action volume became weaker.

Top management's communication in economic crisis and the firm's subsequent performance: sentiment analysis approach

PurposeIn economic crisis, where tensions create anxiety and test the emotions of the firms' shareholders, communication from top management is very crucial as it provides the reflection of the managers' interpretation of the firms' situation and potential strategies. The goal of this paper is to investigate the relationships between sentiment, as an aspect of emotions extracted from the letters to shareholders, managerial discretion and the firms' subsequent performance and performance trajectory during crisis.Design/methodology/approachA sentiment analysis was conducted to extract the sentiment from the letters to shareholders, which were collected from firms in two countries with different levels of managerial discretion (US vs. Japan). Hypotheses were developed and tested using a series of regression analysis.FindingsThe primary findings indicate that (1) managerial sentiment identified in letters to shareholders can potentially be related to the firm's subsequent performance in the economic crisis, and (2) managerial discretion moderates the relationship between managerial sentiment and subsequent firm performance.Practical implicationsWhen the managerial discretion is high, firms' shareholders can use the sentiment in top management communications to gauge whether the firms' situation would be improving in the near future.Originality/valueThis study expands the current research on sentiment analysis and firm performance to the context of economic crisis by suggesting that managerial sentiment can be substantially provoked as firms are facing with stressful economic conditions. The study also highlights the moderating role of managerial discretion on the firms' subsequent performance.

Making the Link: Cash Holdings, Managerial Ability and Discretion

While prior research has extensively investigated the association between firm-level attributes and CEO's characteristics, there is little evidence on whether the managerial ability is associated with cash holdings. In this paper, we examine the link between managerial ability and corporate cash holdings using data on U.S. non-financial firms from 1980 to 2016. We find that high-ability managers are expected to hold more cash than their counterparts of lower ability. Furthermore, the study focuses on how corporate cash holdings decision is affected by the joint effect of managerial discretion and managerial ability. The empirical findings suggest that firms with high levels of managerial discretion (i.e., prospectors) allow highly skilled managers to pursue corporate goals by accumulating large amounts of cash; the relation for firms with lower discretion (i.e., defenders) is ambiguous. The contribution of our study is to further examine the value and effectiveness of high-quality management in explaining disparities in decision making related to cash holdings.

The Impact of Commitment to the Status Quo on Managerial Discretion

Managerial discretion has been frequently used in management literature to explain why top executives have more or less influence on firms’ success. However, very limited evidence exists on how managerial characteristics shape individual levels of discretion. We empirically analyze how the CEO’s commitment to the status quo (CSQ) affects the personal level of discretion. Our results show that high CSQ reduces the level of managerial discretion. Thus, our study contributes to both the literature on managerial discretion by uncovering rare evidence on its dependence on managerial characteristics and the literature on CSQ by identifying a new dimension of CSQ consequences.

Line managers and HRM: A managerial discretion perspective

AbstractLine managers play a central role in HRM practices, but research and theory on how their role is enacted remains underdeveloped. This paper presents a case study of a large U.K.‐based fashion retailer and uses managerial discretion theory to develop a novel understanding of line managers' contribution to the implementation of HRM practices. We describe three distinct ways in which line managers engage with HRM policies and procedures, and propose that line managers make an important contribution to the effective implementation of HRM systems through exerting their cognitive and political abilities to bring about decisions that are well suited to their local situations. Moreover, we find that HR specialists design and manage HRM policies and procedures to afford different levels of managerial discretion in different areas of HRM.

CEO characteristics and SME foreign market entry mode choice

Purpose– Using arguments from the upper echelons perspective this paper aims to examine the impact of CEO characteristics on small and medium-sized enterprises’ (SMEs’) equity foreign market entry mode choice and how these associations are jointly moderated by geographic experience of the firm and host-country political risk.Design/methodology/approach– The empirical analysis draws on data gathered from German SMEs testing triple-interaction effects between CEO’s age, firm tenure and international experience, geographic experience of the firm (organizational level), and host-country political risk (environmental level).Findings– Empirical findings validate that the influence of CEO’s age and firm tenure on SME foreign market entry mode choice varies by managers’ level of managerial discretion (i.e. latitude of action) as determined by the SME’s geographic experience and the level of political risks prevailing in the foreign market.Practical implications– Empirical findings help SME owners and managers to understand how CEO’s age and firm tenure are related with individual’s risk-taking behavior and information-processing demands and how these contingencies vary by the context in which the individual CEO is nested.Originality/value– This study contributes to the growing body of literature focussing on SME foreign market entry mode choice by emphasizing the important role of CEOs in the decision to internationalize. More specific, this study contributes by an examination of the interactive effect of CEO’s age, firm tenure and international experience, geographic experience of the firm and host-country political risk and, therefore, emphasizes the context and boundary conditions under which the association between CEO characteristics and foreign market entry mode choice is more or less pronounced.

Goodwill Impairment Charges Under Sfas No. 142: Role of Executives' Incentives and Corporate Governance

I provide evidence on the roles of managers' stock option holdings and corporate governance in managers' choice to recognize goodwill impairment losses in the years subsequent to the adoption of SFAS 142. I find that the likelihood of recognizing the existing impairment losses significantly decreases when the managers have sizable holdings of in-the-money stock options. On the other hand, the likelihood of recognizing the existing impairment losses significantly increases when firms have stronger corporate governance, as measured by percentage of outside directors, percentage of outside directors' ownership, number of busy directors, and separation of CEO and Chair titles. These inferences hold after controlling for firm-specific and industry variables as well as other determinants of write-offs. The results have implications for the debate surrounding SFAS 142's effectiveness which centered on whether the level of managerial discretion allowed by the standard could lead to biased decisions in managers' determination of goodwill impairment.

Resource Dependence, Managerial Discretion and Stakeholder Performance

Despite its remarkable rise in popularity, theory continues to be criticized for a dearth of empirical studies as well as ambiguity in the underlying theory. Several scholars have argued that resource dependence theory provides a useful lens through which to view firm-stakeholder relationships (Frooman 1999; Mitchell, Agle, & Wood 1997; Rowley 1997). There may, however, be reason to question the extent of this proposed theoretical bolster due to differences in assumptions and prescriptions between the two theories. To test this proposed linkage, we introduce stakeholder as a measure of how well stakeholders are treated by the firm. We develop resource dependence-based hypotheses concerning performance based on Boyd's (1990, 1995) operationalization of the three dimensions of environmental uncertainty identified by Dess & Beard (1984): munificence, dynamism, and complexity. As anticipated, these initial tests returned equivocal results. We follow up these results by considering the effects of different levels of managerial discretion (Hambrick & Finkelstein 1987) on performance. We find that, under conditions of greater managerial discretion, performance increases. Differences between resource dependence and theory are elaborated and implications for future research are discussed.

Managerial Compensation and Firm Performance: The Moderating Role of Firm Strategy as a Proxy of Managerial Discretion

This paper analyzes the effect of strategic context on managerial compensation design, and the interactive influence on firm performance for a set of Spanish companies. Specifically, this study examines the performance implications of the fit between different managerial compensation systems and diverse firm’s strategic orientations – representing various levels of managerial discretion. Based on a framework combining agency theory and managerial discretion concept, a research design with both archival and survey data is used to test hypotheses in a sample of 82 firms. The findings offer sufficient confirmation of theoretical arguments, providing extensions of this research stream for non‐U.S. firms. Results show that firms benefit from the design of managerial compensation systems when they match the managerial control and risk‐bearing requirements imposed by the strategic context. Specifically, risk‐encouraging compensation systems are better for prospector firms – high level of managerial discretion – whereas risk‐discouraging compensation systems are better for defender firms – low level of managerial discretion.

Top-Management-Team Tenure and Organizational Outcomes: The Moderating Role of Managerial Discretion

This project was supported by the Social Sciences and Humanities Research Council of Canada, the Irwin Foundation, and Columbia University's Executive Leadership Research Center. We would like to thank Warren Boeker, Bert Cannella, Ming-Jer Chen, John Delaney, Jim Fredrickson, Sara Keck, Nandini Rajagopalan, Mike Tushman, and the anonymous reviewers for their helpful comments on earlier drafts of this paper. Drawing on an upper-echelons framework to study the effects of top-management-team tenure and modeling managerial discretion as a moderating variable, this study examined the relationship between managerial tenure and such organizational outcomes as strategic persistence and conformity in strategy and performance with other firms in an industry. In a sample of 100 organizations in the computer, chemical, and natural-gas distribution industries, executive-team tenure was found to have a significant effect on strategy and performance, with long-tenured managerial teams following more persistent strategies, strategies that conformed to central tendencies of the industry, and exhibiting performance that closely adhered to industry averages. Consistent with the theory, results differed depending on the level of managerial discretion, with the strongest results occurring in contexts that allowed managers high discretion.'

Growth of Firms, Capital Market Uncertainty and Managerial Tenure

'Managerial' theories of the firm recognize that such structural-institutional factors as separation of ownership from control, oligopolistic markets, capital market transaction costs and modern corporate organizational forms permit managers considerable discretion in pursuing goals other than the neoclassical objective of wealth maximization; these aspects of large firms have been developed by Baumol [i], 0. E. Williamson [i6], Marris [8], [9], Penrose [I I], SO'Ow [ I 3], J. Williamson [ I 5], Yarrow [I 8] and Jensen and Meckling [6]. Consequently, the performance of managerial firms with respect to pricing, marketing and investment policies may depart considerably from that of their neoclassical counterpart. The extent and social importance of managerial discretion depends primarily upon the efficacy of alternative social-control institutions for enforcing internal efficiency. More particularly, performance depends on product and capital market constraints on the manager's choice set. While most of the empirial evidence regarding the extent of non-wealth-maximizing behavior consists of casual observation of particular abuses, recent empirical work by Grabowski and Mueller [3], Kuehn [7] and Smiley [I 2] reveals that the latitude for the exercise of managerial discretion may be considerable. This paper extends the analysis of managerial models of the growing firm by examining the nature of stochastic capital market controls on the latitude of managerial discretion. Specifically, the formulation depicts management's tenure in office to be a random variable whose probability density function depends on the level of managerial discretion, where discretion is defined as the difference between managerial policy and long-run profit-maximization policy. A management that pursues profit maximization will face relatively little threat of capital market discipline, while a more divergent policy subjects managers to a greater threat of removal from office, either from owners or takeover by other firms. The approach taken here is similar to that of statistical renewal theory. The hazard function of renewal theory becomes the conditional probability that managers will be replaced in some short interval, given that they have survived to that time. There are apparent advantages to this viewpoint.