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PurposeTalented managers arguably remain quintessential to firm value and performance. While the literature offers evidence for the long-term orientation of talented managers, there is a paucity of evidence on the short-term performance of managers. Here, we examine the relationship between managerial talent and working capital management (WCM).Design/methodology/approachThis study primarily employs a panel fixed-effect method controlling for firm-year and firm-industry for non-financial and non-utility firms for the years 1980 through 2016. Also, the authors control of potential bias that may impact the result. These controls include social capital, financial constraints and tests for endogeneity and spurious correlation.FindingsThe authors find the association between managerial talent and WCM to be positive and significant. The results indicate that talented managers have a higher cash conversion cycle. The empirical evidence still holds after controlling for social capital, religiosity and financial constraints. Also, the evidence still holds by employing an interaction term between Tobin's Q as a proxy for investment opportunities and talented managers.Practical implicationsThe finding may lend credence to executive contracts. Human nature, by default, is only vested on a net benefit for self-aggrandization. Self-aggrandization can be evident through structures in managerial contracts. These contracts usually tie consequences to long-term growths. If a benefit is offered based on short-term operational goals, talented managers may do more to the management of working capital.Originality/valueIn the managerial talent literature, talents reflect a holistic picture of one that can succeed in both the short-term and long-term goals of a company. Here, the authors show that talented managers are inefficient in meeting short-term goal – working capital management. Thus, the authors add to the research by providing evidence that talented managers are myopic.

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PurposeThis study examines the efficacy of compensation in encouraging corporate executives to promote corporate social responsibility (CSR). In particular, it closely examines the effect of a golden parachute (GP) on an executive's behavior toward CSR.Design/methodology/approachThis study uses longitudinal data on 1,301 US firms for the period from 1993 to 2013. The data comes from Compustat, MSCI ESG STATS, RiskMetrics and ExecuComp.FindingsWe find an inverse association between current and long-term compensations and GP on firms' CSR. However, a test on the moderating effect discloses that a GP and long-term compensation jointly and positively increase the firms' CSR performance. This increase supports the idea that executives with a GP seek to maximize their long-term wealth by approving CSR projects that add value. The results also show that female executives are more likely to promote CSR than their male counterparts, and older executives are less willing to engage in CSR projects.Practical implicationsAdding a GP contractual clause to the executive compensation package could encourage greater engagement in CSR projects. The CEO with a GP will ensure that the firm engages in only value-enhancing CSR projects; this should align the interest of the society (greater firm engagement in CSR) with the interest of the firm (value maximization).Originality/valueThis study contributes to the literature by examining the moderating effect of a GP on the association between CSR and executive compensation.

Purpose The decisions marketing managers make on advertising expenditures are vital to maintaining the sales and profitability of a firm. However, these decisions have not been taken into account to a great enough extent when determining a firm’s performance. The purpose of this paper is to better understand the marketing-finance interface and to reveal the effect marketers’ discretionary advertising expenditures can have on firm performance. In particular, the real activities method of managed earnings (ME) will be used to study this phenomenon. Design/methodology/approach The initial sample consisted of all the companies that appear in the North American COMPUSTAT files over the period 1970-2014. Since the focus here is on the effect of discretionary advertising expenses on firm performance, the authors restricted the samples to only include observations with advertising expenses. Therefore, the sample included 14,732 firms. Findings OLS regressions revealed a negative relationship between marketers’ discretionary advertising expenditures and firm performance using return on assets as a proxy for firm performance. Additional regressions displayed similar results for return on sale and return on cash adjusted asset proxies. Fixed effect and Tobit regressions also confirmed these findings. Finally, this effect was especially true for low performing firms. The economic significance of these findings on firm performance is also discussed. Originality/value The decisions made by marketing managers on advertising promotional efforts impact sales directly and brand equity indirectly, but they can also have an impact on firm performance. Therefore, it is important for investors to understand the level of ME in relation to marketing and advertising decisions that are taking place at their firm.

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Purpose The purpose of this paper is to investigate the influence of executive compensation on the propensity to manage earnings. In particular, the authors examine an executive contractual clause known as a golden parachute (hereafter GP is interchangeably used). Usually, the triggering of a GP occurs for the following reasons: in a takeover, in termination of employment, and if the executive remains with the company through a recessionary cycle. Specifically, the authors ask the following questions: for firms that their CEO have a GP, do these firms manage earnings more? Does the age of the CEO matter for firms that have adopted a GP concerning the managing earnings? Design/methodology/approach The sample is based on a review of the literature on GPs and managed earnings. the authors’ data come from COMPUSTAT, CRSP, EXECUCOMP and Risk Metrics, and consist of 1,184 US firms from 1992 to 2011. A GP is binary, whereas the authors represent managed earnings through accruals and real activity. Findings The authors find that the propensity to manage earnings varies on the type of methods strategically used. However, controlling for the effect of SOX reveals that GP firms are more likely to manage earnings. Younger CEOs are less likely to exacerbate earnings upward. Research limitations/implications The authors are limited to small sample based on when the data were collected. Practical implications The evidence shows that GP alleviates CEOs’ concerns on short-term profits. However, it entrenches CEOs. Particularly, CEOs with a GP are more likely to exacerbate earnings. Thus, there is a need for compensation committees to give considerable attention to how GPs are assigned. Originality/value To the authors’ knowledge, this is the first study that explores the effect of a GP on a firm’s propensity to manage earnings.

We examine the impact of social capital on board gender diversity among U.S. firms. We test whether trust and social networks in a county lead to an increase in female board representation. We find that firms headquartered in high‐social‐capital counties have higher diversity in their corporate board. Economically, we estimate that a 1 standard deviation (SD) increase in social capital leads to a 0.042 SD increase in board gender diversity. We contribute to the literature by extending the evidence on board gender diversity determinants to informal institutions.