Top Executives Research Articles

Getting Mixed Signals? How Top Executive Communications about Firm Strategy Shape Market Evaluations

Markets have a fundamental information asymmetry problem in evaluating public organizations, as market actors lack detailed firsthand knowledge about organizational capabilities and strategies. Top executive communication helps to address this asymmetry by providing information about firm strategies that signal firm quality and intentions. In this study we use signaling theory to examine how top executive communications about different parts of their firm’s strategy provide signals to securities analysts that shape their evaluations of the company. We hypothesize that analysts, working on behalf of shareholders who are interested in stock growth, positively evaluate communication related to externally-oriented strategies that signal alignment with analyst goals for growth, and negatively evaluate communication that focuses on internally-oriented maintenance strategies that signal concerns about firm capabilities and market positioning. We then explore the potential moderating influence of factors that reduce signal efficacy through lower signal intensity or weaker signal consistency. We find support for our arguments using a novel text analysis tool in a random sample of S&P500 companies. In supplemental analysis we find that several contextual factors can also magnify or suppress signal impact, assess which specific strategies have the biggest impact, and identify different patterns for high and low performing firms.

DEI at the Top? A Corporate Governance View on the Composition and Characteristics of Firm Leaders

Given the recent rise in conversations on social issues such as diversity, equity, and inclusion, in this symposium we first seek to focus on questions that ask how internal and external governance mechanisms can affect the composition (e.g., in terms of gender, race/ethnicity) of top management teams and boards – that is, who gets appointed to the leadership. In addition, echoing prior calls that much more needs to be done to understand the causes rather than the consequences of managerial characteristics if we seek to further our insights into how such characteristics eventually become manifested in firm outcomes, we also intend to have a discussion on how corporate governance mechanisms can shape the often-studied individual attributes (e.g., values, cognitions, even personalities) of top executives.

DO STOCK BUYBACKS SUPPRESS CORPORATE INNOVATION?

In 2021, the United States (U.S.) publicly traded firms repurchased nearly $850 billion of their own shares, setting an all-time record. Given the enormous scale of this resource allocation away from investment in innovation and growth and toward shareholders, it is reasonable to consider if these buybacks create opportunity costs. Stock buybacks increase earnings per share, even in the wake of no earnings growth, driving up share price and benefitting the top executives who make these capital allocation decisions by increasing the value of their stock options. Pundits disagree on the impact that high levels of buybacks have on the economy, some arguing that stock buybacks come at the expense of strategic investment in innovation while others point to diminishing returns to research and development (RnD) investment as the reason for decreases in innovative activity. This paper empirically tests whether share buybacks are suppressing corporate innovation in ways that control for widely observed declines in returns to R&D investment, and the endogenous relationship between stock buybacks and innovation. Statistical analysis provides strong evidence that share buybacks are suppressing corporate innovation. This has enormous ramifications to the long-term viability of U.S. industries and to social justice.

Força de trabalho e gerenciamento de resultados: Evidências no mercado de capitais brasileiro

ABSTRACT We aimed to investigate the relationship between workforce [força de trabalho (FT)] and earnings management in the Brazilian capital market and, additionally, identify whether operating activities management is a substitute for management by accruals. Evidence of the effect of the FT on earnings management practice is controversial, sometimes showing an effect on the reduction or smoothing of profit or even no effect. In Brazil, there are no studies that investigate how the intensity of the FT affects the managers’ behavior regarding the manipulation of profit. The research is relevant to the regulatory bodies because it brings empirical evidence of the incentives generated by the pressure of the FT so that the top executives reduce the result of the period, in a substitute way, to the manipulation of the company's operational activities. In addition, it is relevant for users of accounting information, as it demonstrates that the FT influences the recognition of results, affecting the quality of accounting information. The findings may assist regulatory bodies and investors, as it demonstrates that pressure from the FT is an important incentive for decision-making by executives and workers at the operating levels of companies and can support the improvement of labor regulations. Following Pae (2005), we use Jones' modified model (1991) with lagged accruals to detect earnings management. To capture the FT intensity, we employed the proxies presented by Hilary (2006) and a variable calculated from the statement of value added [demonstração do valor adicionado (DVA)]. We analyzed 119 companies listed on the Brazilian stock exchange during the period 2012-2018. It were found that the intensity of the FT negatively influences earnings management by accruals [gerenciamento de resultados por accruals (GRA)], expanding the evidence on the effects of workers' bargaining power on accounting choices.

An empirical study to prioritize the determinants of corporate sustainability performance using analytic hierarchy process

PurposeThe use of natural resources by organizations has a significant impact on society, resulting in business firms playing a vital role in developing sustainable development. As a result, corporate sustainability has become an integral aspect of a company’s vision and policy in the modern days. Companies issue sustainability reports based on various criteria and metrics, thereby attempting to gain a competitive edge. This study aims to assess and prioritize the numerous factors that influence corporate sustainability performance.Design/methodology/approachThe analytic hierarchy process (AHP) is used to prioritize the identified determinants of corporate sustainability performance based on the literature. Several experts from business and academia were engaged to build a comparison matrix for assessing the various aspects of corporate sustainability performance. As a result, various corporate sustainability determinants were determined and prioritized following an extensive literature review using the AHP.FindingsThe most critical component for companies is an economic indicator. Developing environmentally and socially responsible suggestions must be a priority for the organization’s economic performance. Economic performance is believed to be most heavily influenced by innovation and in the other category like environmental and social performance are highly influenced by environment management policies and shareholder responsibility, respectively. Researchers’ findings suggest that to promote sustainability, top executives should devote all of their attention to innovation, environment management policies and shareholder responsibility.Research limitations/implicationsThese studies are primarily concerned with developed countries. And, the other fundamental constraint of the AHP study is that the rating scale adopted in the analysis is conceptual. Therefore, pairwise comparisons with a variety of indicators have the potential to introduce bias into the results.Practical implicationsThis paper proposes a methodical and operational technique for selecting the ultimate priority of sustainability indicators when it comes to exploiting competitive information on business performance. The paper also recommended sustainability rating technique might be carried out once every six months to improve the overall quality and performance of the organization.Originality/valueThe advantages of adopting and executing corporate sustainability are enormous, and managers must determine whether sustainability is profitable or not. This question prompts further inquiries. For example, what are the numerous critical determinants of corporate sustainability performance? Several scholars throughout the world are looking at it for this reason. As a result, it is essential to comprehend and prioritize the various determinants of corporate sustainability performance.

Perception of Public Relations Practice Among Selected Chief Executive Officers (CEOs) In Ghana

The study's goal was to find out what some of Ghana's top executives thought about public relations. The goals were to determine the Chief Executive Officers' (CEOs') understanding of public relations, as well as their perceptions of public relations' role in strategic management and the restrictions of public relations' role in corporate strategy. Through an in-depth interview with five (5) CEOs of chosen agencies within Ghana's Ministry of Transport, the study gathered data using a qualitative research technique. This data was then evaluated using theme analysis, which demonstrated that the public impression of public relations practice in Ghana is positive, implying that the technique is effective. Public relations were deemed to be an important role in strategic management, particularly if it was part of top management. It also limited its contribution to business strategy owing to a variety of problems experienced in the chosen firms, including financial limits, a lack of deep understanding of CEOs in public relations, and others. According to the conclusions of the research, Ghanaian CEOs and business leaders should identify and promote public relations practice. The Institute of Public Relations Ghana should speed up its attempts to enact a statute making public relations a regulated profession.

Political Promotion Incentives and Firm Risk: Evidence from State-owned Enterprises in China

ABSTRACT Top executives in state-owned enterprises (SOEs) in China can be promoted to government sectors. This is regarded as political promotion. Using hand-collected turnover data for top executives in SOEs and adopting a time-varying difference-in-differences design, we find that firm risk is significantly lower in the years immediately before the political promotion of top executives, when their incentives for political promotions are stronger. Moreover, strong industry tournament incentives counteract the impact of political promotion incentives on firm risk. This study supplements tournament theory and enhances our understanding of how different incentive mechanisms interact and affect firms’ choices vis-à-vis their risk-taking activities.

The effect of ‘underwriter–issuer’ personal connections on IPO underpricing

Using a large sample of US IPOs between 1999 and 2020, we show that personal connections between directors and top executives of issuers and those of underwriting banks result in significantly lower levels of IPO underpricing. We estimate the average effect to be about 13 percentage points. The results hold with several alternative robustness tests including non-random choice of underwriter, endogenous presence of venture capitalists, additional controls for managerial traits, matching exercises and doubly robust estimations. Our results indicate that the effect of connections is significantly stronger for companies that are more likely to suffer from asymmetric information problems. This corroborates the idea that the lower level of underpricing for connected companies reflects better flow of information with the underwriter.

Executive Reward Structure and Financial Performance of Listed Companies in the Nairobi Securities Exchange, Kenya

Studies have reported positive and significant relationship,that is, positive relationship between executive fixed pay, cash bonus, stock options and company’s financial performance; others negative and significant relationship, while others no significant relationship. In view of4this, the4 study4 sought4 to4 establish4 the4 relationship4 between4 executive4 reward4 structure4 and4 financial4 performance4 of4 listed4 companies4 at4 the4 Nairobi4 Securities4Exchange, Kenya. The investigation's precise goals were to establish the impact of executive base pay, bonuses, and non-cash incentives, as well as executive7 stock7options, on7 the7 financial7 performance7 of7 firms7listed7 on7the Nairobi Securities7Exchange7in7Kenya.The research also determined if the rate of inflation had a moderating influence on the association between CEO compensation and financial performance of Nairobi securities exchange-listed businesses. Stakeholder theory, agency theory, marginal productivity theory, and managerial power and governance theory were all used in this research. In this study, the positivist philosophy was applied, as well as a causal research design. The target population was all 65 listed businesses on the Nairobi Securities Exchange in Kenya, and a census was conducted. The research employed panel secondary data from annual financial statements of NSE-listed businesses. The study finding indicated that all the study variables except for inflation had a positive correlation with with financial performance of listed firms. However it is basic pay, bonuses and non cash benefits that had a positive and significant effect on the financial performance of listed firms. The effect of executive share options was positive but insignificant at 5% level of significance. Equally the effect of inflation was negative but insignificant. However, inflation has a signinificant effect as a moderator in the relationship7 between7 executive7 rewards7 and7 financial7 performance7 of7 listed7 firms7 at7 the7 Nairobi7 Securities7Exchange.Its is on the basis on of this findings that the study recommends that listed firms need to tailor their executive compensation and reward schemes to performance to encourage the top executives to continuous work hard and achieve their performance targets. Keywords: Executive reward structure, executive basic salary, executive bonuses, executive non-cash benefits, executive stock options, inflation rate, financial performance.

CHARACTERISTICS OF TOP MANAGEMENT INFLUENCING FIRM PERFORMANCE: A SYSTEMATIC REVIEW

Considerable amount of research has investigated the influence of various characteristic of top executives on firm performance. Despite the proliferation of the research in exploring the impact of top executives’ characteristics on firm performance, the literature is fragmented and disparate. The present study aims to provide a holistic understanding of the influence of several characteristic of the top management at various strategic levels including board members, CEOs and TMTs on the performance of the firm. An integrative framework is developed that facilitates in gaining an overview of the field to help identify the future directions

Power, Policy, and the Compensation of Top Executives

This article contributes to the quantitative analysis of international differences in executive compensation with a novel emphasis on the role of political drivers—specifically, labor power, owner power, and executive power—while controlling for market factors. It leverages nested analysis, pairing a 2016 cross-sectional analysis of 179 firms in 20 countries with case studies of Finland, from 1971 to 2017, and the United States, from 1936 to 2016. The 2016 cross-sectional analysis of the world's largest firms finds market forces are important, but leave a large portion of international differences in top executive compensation unexplained. Also important are labor power and executive power. Similarly, while controlling for market forces, the longitudinal case studies of large firms in the US and Finland each find stronger labor power relative to executive power associated with lower executive pay. The theoretical framework advanced in this paper helps to explain why top CEO pay—and consequent top-end income inequality—are each extreme in certain countries and periods, and modest in others.

Big Fish in Small (and Big) Ponds: A Study of Careers

Abstract Talented, ambitious workers (big fish) often join highly competitive organizations (big ponds), though they sometimes instead choose less competitive organizations (small ponds) offering brighter promotion prospects. Big fish exist in both types of organizations, though average worker ability is higher in big ponds. Top executives enjoy higher wages in big ponds. Choosing a big pond allows workers to signal high ability. Workers sometimes overestimate or underestimate their abilities, choosing the wrong pond. Big ponds tend to be larger in total employment. All of the preceding phenomena are shown to be consistent with equilibrium in a new theoretical model of careers. (JEL J24, M53)

Developing Social Entrepreneurship Orientation: The Impact of Internal Work Locus of Control and Bricolage.

Using core self-evaluation theory, the current study assesses the effect of internal work locus of control and bricolage on social entrepreneurship orientation. We adopted the cross-sectional survey design using a sampling frame to engage 400 top executives of social enterprises in mainland China. Three hundred and seventy-two of the executives replied, presenting a response rate of 93%. Results of structural equation modeling analysis show significant positive relationships between internal work locus of control, bricolage, and social entrepreneurship orientation. The positive mediating effect of bricolage on the relationship between internal work locus of control and social entrepreneurship orientation was also found to be true. Consequently, to foster social entrepreneurship orientation, top executives of social enterprises need to gather available resources for bricolage tasks. These findings contribute new knowledge to how internal work locus of control affects social entrepreneurship orientation through the bricolage activity of Chinese social enterprises. Through core self-evaluation theory, we demonstrate the effect of internal work locus of control as a preceding factor in the relationship between bricolage and social entrepreneurship orientation.

Criteria to appraise top executives for ambidextrous leadership

PurposeThis paper determines and analyses criteria for top executives to use in appraisal systems to promote ambidextrous leadership, enhancing the organization's ability to identify persons who can lead ambidextrously or determining the development potential of existing top executives.Design/methodology/approachUsing a theoretical-conceptual, triangulated approach, the investigation in this paper examines the requirements for top executives to lead ambidextrously. In a subsequent review and frequency analysis, the specific attributes/behaviours a top executive should possess are examined. Analysis of the application of these appraisal criteria is theoretical.FindingsThe criteria listed in this paper (e.g. ambition, courage, vision) can be used to foster ambidextrous leadership when hiring or evaluating performance. These and/or the criteria already existing in an organization should be classified in one of the two categories presented (1. one-dimensional criteria: differentiation between exploration/exploitation is not necessary; 2. multidimensional criteria: differentiation between exploration and exploitation, opening and closing leadership, and first- and second-order changes is necessary) to differentiate the criteria and thereby illuminate their application in the areas of exploration and exploitation. Thus, a corresponding assessment of applicants and/or job holders for ambidextrous leadership is possible.Originality/valueThis theoretical analysis contributes to the literature on top executives' recruitment, performance management, career and succession planning, focusing on ambidextrous leadership and organizational development by elucidating a differentiated concept for appraisal criteria so that the right person can be appointed to the top executive position or assigned to the necessary personnel development programme. Thus identified, a top executive may be positioned to maintain, improve or install ambidextrous leadership and practice in an organization.

Danger from a distance: Executives' social distance and multinationals' responses to host‐country terrorist attacks

AbstractResearch SummaryThis article examines whether and under what conditions multinational enterprises (MNEs) are likely to divest a subsidiary exposed to host‐country terrorist attacks. Drawing on construal level theory from social psychology, we propose that the association between subsidiaries' exposure to host‐country terrorist attacks and MNEs' likelihood of divesting these subsidiaries depends on their executives' social distance from the event host country. Based on a sample of Fortune US 100 MNEs and their foreign subsidiaries from 2003 to 2014, we find that on average, MNEs are more likely to divest their subsidiaries when their exposure to host‐country terrorist attacks increases; however, the effect is only prominent in host countries to which MNE executives are socially proximate.Managerial SummaryMNEs confronting terrorism threats in a host country sometimes respond by divesting subsidiaries exposed to the threats even when the high opportunity costs of divestment render this response irrational. We argue that the MNEs' divestment response may not be driven by rational economic calculations but by their executive’ subjective threat perceptions. We investigate how top executives’ subjective threat perceptions, as a function of their social distance from the event host country, influence MNEs’ divestment decisions. We find that on average, MNEs do tend to divest their subsidiaries when they are exposed to a high terrorism threat in a host country; however, they are much less likely to do so when their top executives are socially distant from the focal host country.

Top executives’ gender and analysts' earnings forecasts

This study adds a behavioral dimension to the analysts’ earnings forecast literature by examining the effect of executives’ gender on forecast accuracy. We theorize that these gender-based behavioral differences can influence analysts’ forecast accuracy. Our research documents that the presence of female CEOs significantly improves analysts’ forecast accuracy across all firms, reflecting CEO's dominant position, while female CFOs have a positive influence on analyst forecast accuracy only for firms with greater information asymmetry. Overall, the evidence shows that analysts are able to draw more accurate assessment of the firm's prospects for corporations led by female executives.

Invited to the party but not allowed to dance? Examining strategic decision-making inclusion of top female executives

PurposeThe gender diversity of top management teams (TMTs) is slowly increasing. Research shows that top executives influence firms through their role in strategic decision-making but that executives are not equally engaged in it. The purpose of this paper is to understand whether gender affects the likelihood of inclusion in strategic decision-making.Design/methodology/approachDrawing on surveys completed by chief executive officers (CEOs) and using expectation states and gender roles theories, the author examines the relationship between gender and inclusion in strategic decision-making for 266 top executives of global public firms.FindingsAfter controlling for a myriad of factors, results indicate that female executives are less likely than male executives to be included in strategic decision-making. Firm tenure moderates this effect such that it leads to a greater likelihood of inclusion for female executives but not male executives.Originality/valueThis study provides a unique consideration of strategic decision-making in TMTs. The findings suggest that diversity and inclusion do not always go hand in hand and that female executives may need to prove themselves more than male executives to be given an equal voice in the strategic direction of the firm.

Rising and thriving in the post COVID-19 era: a case study of COSMAX, a leader of the Korean cosmetic industry

ABSTRACT In this paper, we consider the impact of COVID-19 on Korean cosmetics firms. The research framework (i.e. OEM/ODM Business Model) shows sensing customer requirements, translating them through a fusion complex design lab, digital technologies (e.g. Big Data, AI, Supply Chain Technologies), and applying manufacturing capabilities for achieving sustainable competitive outcomes. It examines how digital technologies influence the ODM business model. The research methods include a literature review, an analysis of internal documents, and field interviews with top executives. It also focuses on the model’s response to the Fourth Industrial Revolution opportunities such as the IoT/AI. The case study covers both prior to the COVID-19 and post pandemic world contexts. We propose propositions based on our research model and discuss relevant lessons to other industries in terms of designing cross-functional creativities, implementing organizational flexibility, and achieving market expansion through operational speed and network partnerships.

Integrating machine learning, modularity and supply chain integration for Branding 4.0

While brands use technologies in various ways to improve their performance, they appear to struggle with achieving Branding 4.0 standards. This new generation of brand development has brought an era of hyper-customized experiences to benefit brand performance. With the Branding 4.0 literature still in its infancy, questions remain regarding how brands can maintain their identity while delivering a hyper-personalized customer experience. This study draws on mass customization, artificial intelligence, and supply chain management literature to investigate how three core organizational capabilities and resources—machine learning, modularity, and supply chain integration—helpful in achieving production flexibility could jointly enable companies to transition to and maintain a Branding 4.0 philosophy through more efficient personalization of their product offerings. This paper reports findings from 15 in-depth interviews with top executives from brands, including some Fortune Global 500 companies, in China's garment and footwear industries to provide insights into Branding 4.0 and the possible contribution of machine learning, modularity application, and supply chain integration. Our findings inform a two-tier response strategy and a three-dimensional analytical framework which provide a theoretical basis for operationalizing Branding 4.0 and exploring, through a resource orchestration lens, how brands can respond to the related adoption challenges. Specifically, our findings show how machine learning's data analysis, knowledge conversion, and transmission capabilities could benefit both modular management and supply chain tasks to optimize product co-design processes and timely responses to customers' changing demands.

Military experience and corporate social responsibility: evidence from china

ABSTRACT In this paper, we investigate how moral attitudes across top executives are related to CSR practices. We find that firms run by military executives are significantly more likely to engage in CSR activities. Specifically, military executives have a moral obligation to place extra weight on caring for shareholders and staff and protecting customers and suppliers’ rights and the environment, while military experience has little influence on the firms’ social contributions. These effects appear to be more pronounced in sinful firms, firms with longer tenured executives, and non-SOE firms. Overall, this study adds evidence to the growing literature regarding the influence of top executives’ personal characteristics on corporate outcomes, as well as enriching the knowledge about firms’ business practices in light of CSR.