Upper-echelon Research Articles

How does CEO social class perception impact employee-related CSR? Evidence from privately owned Chinese firms

Despite recent progress, the literature is still unclear on the internal determinants of employee-related corporate social responsibility (CSR), particularly regarding the effect of the chief executive officer (CEO). Integrating upper echelons theory with the social class literature, this study examines how CEO social class perception influences private firms’ employee-related CSR. Based on a unique dataset from the Nationwide Private Firms Survey of China, this study empirically shows that higher CEO social class perception promotes a higher level of employee-related CSR activities in private firms. Additionally, this positive impact of CEO social class perception on employee-related CSR is amplified among younger firms and firms that face higher market munificence. Our study contributes to the current literature by enriching our understanding of the antecedents of employee-related CSR from the perspective of the CEO’s cognition of his or her social class and revealing the related informative boundary conditions.

Are scholar-type CEOs more conducive to promoting industrial AI transformation of manufacturing companies?

PurposeIn order to effectively promote the deep integration of artificial intelligence and the real economy and empower real enterprises to improve quality and efficiency, this study regards the CEO as a high-end innovation resource and aims to empirically test the impact of scholar-type CEOs on the industrial artificial intelligence (AI) transformation of manufacturing enterprises.Design/methodology/approachGrounded on the upper echelons theory, this paper preliminarily selects A-share manufacturing listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange that are affiliated to enterprise groups from 2014 to 2020 as samples. Furthermore, the Logit regression is conducted to analyze the influence of scholar-type CEOs about industrial AI transformation.FindingsThe results show that scholar-type CEO plays a significant role in promoting industrial AI transformation. The parent-subsidiary corporations executives' ties positively moderates the impact of scholar-type CEOs on industrial AI transformation. Further, internal control quality plays a partial mediating role between scholar-type CEOs and industrial AI transformation. Compared with private enterprises, scholar-type CEOs play a stronger role in promoting industrial AI transformation of state-owned enterprises.Originality/valueFirst, this paper expands the research related to the influencing factors of industrial AI transformation based on upper echelons theory and clarifies the influencing mechanism of scholar-type CEOs affecting industrial AI transformation from the perspective of executives' behavior. Second, this study further enriches the research framework on the economic consequences of scholar-type CEOs and provides a useful supplement to the research literature in the field of upper echelons theory. Third, this paper is not limited to a single enterprise but involves the management practice of resource allocation within the enterprise groups, further clarifies the internal logic of the decision-making of industrial AI transformation of listed companies within the framework of enterprise groups, providing theoretical reference for the scientific design of the governance mechanism of parent-subsidiary companies.

Are MBA CEOs really more risk-averse?

This paper extends the literature on upper echelons theory that emphasizes the impact of top executives' personal characteristics on their choices by examining the relationship between CEOs holding MBAs and the riskiness of corporate policies, including investment and financial policies. To do so, data belonging to all stocks listed on the S&P 500 is collected to cover the period from 2005 to 2020 and analyzed using a panel regression model. The findings show that CEOs holding MBAs tend to undertake less risky investments compared to others, but this negative relationship is induced by unobservable heterogeneities across firms and time-varying heterogeneity across industries. Moreover, the findings failed to find any relationship between CEO-holding MBAs and financial leverage, while the relationship is negative between CEO-holding MBAs and corporate liquidity. These findings strongly deny the well-documented risk-aversion behavior of CEO-holding MBAs and support their belief in “profit-first” and self-interest” principles.

The Effects of System Pressure on Low-Carbon Innovation in Firms: A Case Study from China

With the signing and implementation of the Paris Agreement, low-carbon models have become the general trend for future development. In this context, many countries have successively introduced relevant low-carbon systems within their companies. These systems bring a lot of pressure on traditional manufacturing enterprises. This study deeply explores the influential mechanism of system pressure on the theory of low-carbon innovation of enterprises. It analyzed 328 questionnaires from 107 enterprises in China by using theoretical models based on the upper echelons theory and the dynamic capability theory. The results of the study indicate that (1) system pressure significantly promotes enterprises’ low-carbon innovation; (2) low-carbon dynamic capability mediates between system pressure and enterprise low-carbon innovation; (3) executives’ low-carbon awareness positively moderates the relationship between system pressure and low-carbon dynamic capability; (4) executive low-carbon awareness moderates the intermediary role of low-carbon dynamic capability between system pressure and enterprise low-carbon innovation. Theoretically, this study deepens empirical studies on system pressure and enterprise low-carbon innovation. This study contributes to the application of the upper echelons theory, dynamic ability theory and enterprise behavior theory in the field of low-carbon research. In view of this, this study intends to serve as a reference material for future low-carbon innovation-related research and a guide for the low-carbon management of enterprises.

Institutional ownership and board governance. A structured literature review on the heterogeneous monitoring role of institutional investors

PurposeThis paper aims to review empirical research on the relationship between institutional ownership (IO) and board governance (85 studies).Design/methodology/approachBased on agency and upper echelons theory, the heterogeneous monitoring function of specific types and the nature of institutional investors on board composition, compensation and chief executive officer (CEO) characteristics will be focused.FindingsThe author found that most studies have referred to archival studies, analyzed the impact of board governance on IO, focused on CEO characteristics, neglected IO heterogeneity and advanced regression models to address endogeneity concerns. In line with the theoretical framework, the relationship between total IO and board governance is heterogeneous. However, specific types such as foreign, dedicated and pressure-resistant institutions represent active monitoring tools and push for increased board governance.Research limitations/implicationsThe author provided useful recommendations for future research from a content and methodological perspective, e.g. the need for analyzing the impact of IO on sustainable board governance and other characteristics of top management team members, e.g. the chief financial officer.Practical implicationsAs many regulatory bodies implemented regulations to promote shareholder rights and board governance, this literature review highlights the connections of both corporate governance mechanisms. Managers should conduct a careful and timely investor analysis and change the composition and compensation of the board of directors in line with institutional investors’ preferences.Originality/valueThis analysis makes useful contributions to prior research by focusing on IO and board governance, whereas the author structured the heterogeneous variables and results within the structured literature review. The authors guides researchers, regulatory bodies and business practice in this corporate governance topic.

Board diversity and corporate social responsibility versus sustainability development: Evidence from US and Australia

Corporate governance plays a critical role in addressing the interests of domestic and global stakeholders. The board of directors is under pressure to represent the interests of every stakeholder. The purpose of this study is to analyze and compare the impact of board diversity on corporate social responsibility and sustainability in the U.S. and Australian non-financial sectors. In this vein, very first time current study, develop an index score for board diversity and sustainable development for both economies. In addition, the study also examines the influence of gender diversity, cultural diversity and diversity of experience on CSR and sustainable development in the two countries. Sample of non-financial sectors embedded from the S&P 1500 Index and the Australian Stock Exchange (ASX) for the periods 2010 to 2020. Results are estimated based on Panel regression models and dynamic GMM. The results of the study show that, on average, corporate social responsibility and sustainable development in the United States are superior to those in Australia. The ASX Diversity Index score has a significant and positive impact on CSR funds and the Sustainability Index. However, in the USA, the Board Diversity Index only impacts CSR funds. Moreover, directors with diverse cultural background in Australian firms are highly promoting sustainable development than US ones. However, cultural diversity on US boards strongly favors CSR practices compared to their Australian counterparts. While the presence of women on the board of directors contributes positively to local CSR activities and has a negative impact on global development in both countries. In addition, the experience of the US Board of Directors has suggested more funding for community development rather than sustainable development. The results of the study make significant contributions to academics and policymakers for U.S. and Australian stock exchanges. To develop CSR practices at the national level and sustainable development at the global level, the American and Australian Security Exchange Commission needs to take initiatives through the deployment of diversified boards of directors. Based on the findings, current study supports the stakeholder theory, Upper Echelon theory and cultural trait theory.

I’m not the executive that I used to be: Understanding causes and consequences of personality change in the upper echelons

Even as studies concerning the importance of executive personality traits continue to proliferate, there remains a need to integrate the burgeoning literature surrounding Upper Echelons Theory (UET) with mounting psychological evidence that adult personalities change over time. Current models of executive personality largely stop short of modeling the capacity and consequence of leader personality change, threatening the validity and usefulness of UET research more broadly. We argue that some UET personality literature conflates personality change with other cognitive phenomena and, by so doing, falls victim to the ‘jingle’ fallacy. To clarify and expand the conversation concerning executive personality change, we detail what is known about adult personality change and suggest opportunities for bridging the gap between UET and other disciplines. We discuss possible drivers of executive personality change, possible firm-level outcomes, and insight into how executive personality change will advance UET research. We also outline methodologies to capture the phenomenon.

Personal characteristics of small business owners and their strategic change behavior during the COVID-19 pandemic

PurposeThis study aims to present and test a model of small business owners’ adaptation during the COVID-19 pandemic, through the lenses of the resource-based view of the firm, upper echelon theory (UET) and positive psychology. Specifically, it examined the relationships between personal characteristics and strategic pivot behavior in a sample of small business owners during a peak period of the crisis in Israel.Design/methodology/approachA sample (N = 202) of small business owners provided information on their business and demographics, and responded to questionnaires assessing their personality (Big Five personality traits), emotional intelligence (EI) and reported the extent to which they implemented strategic changes during the pandemic. These changes were categorized as “positive” (e.g. shifting to new markets, adding partners or investors) or “negative’ (e.g. letting employees go).FindingsThe results partially support an association between personality traits and “positive” strategic change behavior, mediated by EI.Research limitations/implicationsThe results suggest that business owners' personality traits, and chief among them – EI may play a key role in enabling flexibility when dealing with a long-term crisis or threat. However, market and legislative differences between markets may limit the generalizability to other sectors or countries.Originality/valueTo the best of the authors’ knowledge, this study is among the first to address small businesses’ COVID-19-related challenges from a personal-resource perspective by applying a theoretical lens integrating the RBV of the firm, UET and positive psychology. The findings provide a better understanding of the ways in which business owners’ personal resources account for business pivot behavior in times of crisis.

Breaking the Auditor’s Silence: Does CEO Openness Influence the Moral Courage of Internal Auditors? Evidence from Uganda

Purpose: Unethical behaviors such as fraud are continuously hurting organisations. Although internal auditors are expected to report unethical behaviours, such as fraud, when witnessed, some remain silent for fear of retaliation. Drawing on upper-echelon theory, this study examines whether the chief executive officer's (CEO's) openness is associated with internal auditors’ moral courage to speak out on ethical concerns.Design: This explanatory study collected data from 128 internal auditors in formal financial institutions using structured questionnaires and used partial least squares structural equation modeling to test the hypothesis.Findings: CEOs' openness to internal auditors' recommendations is positively associated with internal auditors’ moral courage.Practical implications: CEOs may appreciate listening to internal auditors as a way of motivating them to speak. Furthermore, boards of governors can encourage CEOs to show openness to internal auditor recommendations.Originality: This study adds to the scant empirical evidence on the factors that influence internal auditors’ moral courage. The empirical findings further confirm that contrary to the idea that internal auditors are independent of CEOs, CEOs influence internal auditors, thereby validating the broader applicability of upper-echelon theory.

Independent directors’ attributes and related party transactions in Malaysia: evidence from an individual perspective

Purpose This study aims to examine the ability of independent directors to discipline related-party transactions (RPTs) among listed companies in Malaysia. Firms typically appoint independent directors individually, not as a group. However, board members are commonly viewed collectively as a group, and evidence of the abilities of individual directors is scarce. Design/methodology/approach The attributes of individual independent directors include accounting literacy, length of service, audit committee membership and active participation in board and audit committee meetings. The unit of analysis is the individual independent director. The final sample consists of 1,552 observations in 2017, and RPTs are categorized as either efficient or conflicting. Findings The study finds that the tenure of individual independent directors and active participation in board meetings affect the firm’s engagement in RPTs. However, the financial literacy, audit committee membership and attendance of independent directors at audit committee meetings do not affect the firm’s engagement in RPTs, either efficient or conflicting. Overall, this result offers limited support for the upper-echelon theory concerning the attributes of individual independent directors and RPTs. Research limitations/implications This study uses cross-sectional observations for 2017, which predates the COVID-19 pandemic. Thus, this study ignores the impact of restrictions in community mobility during the pandemic on the independent director’s ability to monitor the corporation. This circumstance may have implications for practice and merit further research. Practical implications The findings provide information for board nominating committees, regulators and policymakers that the capability of individual independent directors to fulfill their responsibilities is limited. The firm’s nominating committee must be very selective in nominating and appointing independent directors with appropriate competencies. Investors should choose companies that have reappointed the same independent directors for an extended period, as they may benefit from the experience in protecting investors’ interests. Originality/value This paper contributes novel evidence to upper-echelon theory literature on the association between independent directors and RPT types from the perspective of individual independent directors.

“I tell my brothers that it can be done”: Indigenous Males Navigating Elite Australian Higher Education

ABSTRACT As Australian higher education grapples with its colonial history, there has been significant attention to recruiting Indigenous students. However, while we have seen increases in Indigenous participation, males lag significantly behind. Very few Indigenous males enter university and even fewer enter the upper echelons of the stratified higher education sector. In this paper, we investigate the experiences of four Indigenous young men who attended an elite Australian higher education institution. Central to our analysis is how their identities are realised in relation to their sense of Indigeneity and Western ways of knowing, being and doing. In capturing the complex identity work of young Indigenous men, we report on three themes present in the data: feelings of alienation and isolation; identification with their Indigenous identity; and how they view higher education in shaping their futures. How these young men navigate selective institutions speaks to debates regarding non-traditional and historically excluded student populations in elite spaces as well as the decolonisation of higher education.

CEO-TMT overseas experience differences and firm performance: A self-categorization theory perspective

Based on upper echelons and self-categorization theories, this study empirically examines the relationship between CEO-top management team (TMT) overseas experience differences and firm performance and the moderating effects of hometown connectedness, ownership nature, and environmental dynamics. We use data on Chinese manufacturing listed companies from 2012 to 2021. The results show that CEO-TMT overseas experience differences significantly and negatively affect firm performance. Hometown connectedness positively moderates this relationship; as CEO-TMT hometown connectedness increases, the negative impact of CEO-TMT overseas experience differences on firm performance decreases. Finally, state ownership and higher environmental dynamics mitigate the negative relationship between CEO-TMT's overseas experiences and firm performance.

Sustainability Reporting Practices in Bangladesh: Insights from Upper Echelons Theory

The objective of this paper is to explore and understand how the top management team (TMT)'s, namely the CEO/ MD/ Board of Directors (BOD) and Executive Committee Members, observable attributes and cognitive traits influence the strategic choices, such as adopting the Sustainability Reporting (SR) practices in the organization. This qualitative study conducts 12 semi-structured in-depth interviews with the Top Management Team, including CEOs of publicly listed companies from different industries in Bangladesh. Using the Upper Echelons theory, the author provides an alternative theoretical lens to the motivations of SR practices in Bangladesh. There has been a number of studies on the relationship between CEO attributes and strategic decisions in management literature, primarily in the developed country context. However, the influence of CEO and TMT traits on strategic choices like SR practices in emerging countries is scant. The overall analysis reveals that cognitive bases like values and beliefs, philosophies, and vision of the top management team (TMT), as well as the observable traits like education and background, career track, functional and financial expertise, international exposure or orientation, views, and understanding of the SDGs and their disclosure influence the strategic choice of organizations like the adoption of SR practices. Demographic traits largely shape the values, views, and attitudes of the top management (Hambrick & Mason, 1984), which help them develop or change their perceptions and eventually influence their strategic choice. This paper contributes to sustainability reporting literature by providing an insight into how the top management characteristics shape the SR practices in an emerging economy like Bangladesh.

The Value of Diversification, Managerial Ability and Corporate Governance: Evidence from Malaysian Firms

Manuscript type: Research paper Research aims: This paper examines the moderating effect of managerial ability on the relationship between diversification and firm value. Design/Methodology/Approach: The analysis is based on all KLSE-listed firms across nine sectors over the period of 2009 to 2017 using panel regression. Research findings: High-ability managers increase Tobin’s q. Managerial ability changes the diversification-firm value relationship from negative to significantly positive. Managerial ability, in terms of governance mechanism, CEO age, and education background, has a positive moderating effect on the value outcome of diversification. Theoretical contribution/Originality: This study is one of the first to link resource-based perspective and outcome of diversification, and find a moderating relationship between diversification and firm value. It contributes to resource-based theory, highlighting that accumulated human capital is a valuable strategic resource for a firm. The results also contribute to the corporate governance literature and provide support for upper echelons theory. Practitioner/Policy implication: The findings are valuable to diversified firms in understanding the effect of managerial ability on the outcome of diversification. Diversified firms that hire older CEOs with better education, practise separate leadership structures, and have a mostly independent board are more likely to benefit from diversification. Research limitation/Implications: This study uses only one proxy for managerial ability. Second, firms are grouped by industry to compare efficiency. However, firms in the same industry can have quite varied inputs and outputs depending on their asset and operation mix.

БОРЬБА ПРЕМЬЕР-МИНИСТРА ВЕЛИКОБРИТАНИИ РОБЕРТА УОЛПОЛА С ОППОЗИЦИЕЙ В 20-Е ГОДЫ XVIII ВЕКА

Robert Walpole was first elected to Parliament in 1701. At the beginning of his political career he worked in many parliamentary committees. In 1721 Walpole becomes the first Prime Minister of Great Britain. During the remainder of George I's reign, Walpole's influence steadily increased in the upper echelons of power. At this time, the principles of Walpole's interaction with the British crown, parliament and government were laid as part of the internal political struggle. The politician gradually consolidates his power at the government level, developing a new internal model of the state structure, which consisted in strengthening the power of the Whig group through a system of political control over the opposition in parliament and the ministry. The main goal of Walpole's domestic policy was to have MPs and ministers work in the interests of the Hanoverian dynasty, thereby distributing finances among their opponents in the Whig faction. In such realities, the political power of the opposition gradually decreased, and Walpole's influence over the king, parliament and ministries gradually increased. As a result, Walpole kept Parliament and the ministry on his side by supporting the Hanoverian dynasty, including through the introduction of low export duties and a reduction in the public debt. The activity of Robert Walpole was a reflection of the domestic policy of Great Britain in the 20s of the XVIII century, which showed the trends and moods that existed in the country.

Impact of Diversity of Executive Team Career Experience and Cooperation Openness on Breakthrough Innovation Performance

In the era of rapid technological iteration in the digital economy, breakthrough innovation is the main source of core competitive advantage for enterprises. Based on Upper Echelons theory and Resource-based theory, using A-share listed companies in the computer, communication, and other electronic equipment manufacturing industries from 2010 to 2021 as research samples, this study explores the impact of diversity of executive team career experience on breakthrough innovation performance, and examines the mediating effect of cooperation openness and the moderating effect of absorptive capacity. The results indicate that the diversity of career experience in executive teams not only has a significant positive impact on breakthrough innovation performance, but also has a significant positive impact on cooperation openness; The cooperation openness has a significant positive impact on breakthrough innovation performance, and plays a partial mediating role between the diversity of career experience of executive teams and breakthrough innovation performance. The absorptive capacity positively regulates the relationship between cooperation openness and breakthrough innovation performance. This study provides a theoretical reference for enterprises to improve breakthrough innovation performance from the perspective of executive experience.

The improvement of legal system, entrepreneur immigration, and corporate cash holdings

This study investigates the relationship between controlling persons' foreign residency rights and the cash holdings of non-state-owned listed firms in China from 2005 to 2018. Our findings indicate that the immigration status of entrepreneurs affects the amount of cash held by their firms, as it reduces legal costs in a weak legal system. This result remains robust under propensity score matching, instrumental variable method, and Heckman two-stage regression. What is more, the improvement of the legal system moderates the impact of entrepreneur immigration on corporate cash holdings, deters their short-sighted tunneling, and motivates them to put more effort into long-term innovation. This study enhances our understanding of the behavioral patterns of immigrant entrepreneurs and contributes to the literature on corporate cash holdings and upper echelons by highlighting the role of the legal system in improving their behavior in emerging markets.

Effect of cash flow risk on corporate failures, and the moderating role of earnings management and abnormal compensation

In this study, we find that United States firms' average cash flow risk (CFR) shows a significantly increasing trend over the past four decades or so. This does not portend well considering the significance of cash flows in maintaining a firm's financial health and going concern status. The CFR also increases dramatically for firms approaching financial distress or bankruptcy, suggesting its important role in predicting a firm's failure. Empirically, we find that CFR has a strong positive effect on a firm's financial distress likelihood. We also find that the association between CFR and financial distress is negatively moderated in firms with high earnings management and abnormal compensation. The results suggest that managers in firms with high CFR are more likely to use heuristics in form of earnings management. Thus, supporting the upper echelons theory related to managers under performance pressure. Meanwhile, consistent with the notion in the agency theory that financial incentives serve as effective monitoring mechanisms, compensation packages can incentivize better risk management practices and decrease the likelihood of a firm's failure. Our findings are also robust to alternative definitions of a firm's failure: financial constraints, presumed debt covenant violation and legal bankruptcy filings.

The role of national context in the relationship between founder CEO and IPO performance

PurposeAlthough founders are often replaced with external CEOs prior to firms making IPOs, firms that do retain founder CEOs generally perform better at IPO. However, this relationship may be contingent upon context. This study aims to investigate how national context influences the relationship between a founder CEO and IPO long-run performance. The authors hypothesize that founder-CEOs will perform better in IPO firms in countries where managerial discretion, future orientation, and the level of conformity to professionalize management are high, and uncertainty avoidance is low.Design/methodology/approachUsing insights from the upper echelon and institutional theory, the authors used hierarchical linear modeling to analyze over 1,000 firms across eight countries.FindingsFounder CEOs perform best in IPO firms in a national context where managerial discretion is low, uncertainty avoidance is high and the level of conformity is high.Originality/valueThis study contributes to a growing area of cross-national IPO research in management by investigating the relationship between culture, management and IPO performance.

Birds of a feather flock together: How and when does the fit of CEO–CFO high promotion focus predict new venture initial public offering fraud?

AbstractResearch Question/IssueThis study attempts to examine how the fit of CEO and CFO high promotion focus, an important motivational‐based psychological trait, can affect new venture initial public offering (IPO) fraud. Furthermore, we explore how this relationship is moderated by CEO–CFO status similarity (firm internal environment) and environmental dynamism (firm external environment).Research Findings/InsightsUsing a sample of Chinese new ventures listed on growth enterprise market from 2010 to 2016, we conduct computer‐aided content analysis to quantify CEO and CFO promotion focus. Results show that the fit of CEO–CFO high promotion focus increases the likelihood of new venture IPO fraud. Moreover, CEO–CFO status similarity and environmental dynamism strengthen this positive relationship.Theoretical/Academic ImplicationsWe make three main contributions to the literature. First, we enrich upper echelons literature on CEO–top management team (TMT) interface by exploring how the psychological characteristic (promotion focus) of CEO–CFO dyad, a subteam of TMT, affects new venture IPO fraud. Second, we contribute to regulatory focus theory by extending interpersonal promotion fit to the context of upper echelons level and exploring its boundary conditions of CEO–CFO status similarity (internal environment) and environmental dynamism (external environment). Third, from the perspective of microfoundation, this study contributes to IPO fraud literature by investigating the antecedents of firm internal factors, specifically the psychological trait—high promotion focus fit of CEO–CFO.Practitioner/Policy ImplicationsBy examining the fit of CEO and CFO high promotion focus, this study shows the need to consider the motivational‐based psychological traits of CEO and CFO when selecting, training, monitoring, dismissing, and compensating executives. Moreover, to prevent new venture IPO fraud, policymakers and key stakeholders such as the board of directors can consider paying much attention to firms with CEO and CFO who possess high promotion focus.