Ceo selection, succession, compensation and firm performance: A theoretical integration and empirical analysis

Zajac, Edward J.

doi:10.1002/smj.4250110304

Cited by 399 publications

(304 citation statements)

References 32 publications

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“…As a co-leader, the COO/president can share the celebrity and benefit from firm success. As an heir apparent, high firm performance will increase the chance that the COO/president is promoted to the CEO position when succession time comes (Zajac, 1990;Zhang and Rajagopalan, 2004).…”

Section: Theory Development a Coo/president As A Partner To A Ceomentioning

confidence: 99%

The presence of a separate COO/president and its impact on strategic change and CEO dismissal

Zhang

2006

Strategic Management Journal

197

171

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The literature on corporate elites has paid significant attention to the leadership structure at the very top of organizations (for example, the consolidation vs. separation of the chief executive officer (CEO) and board chair positions-for a review, see Daily and Dalton, 1997). This is because corporate elites in different governance positions may have different interests, which means that the leadership structure at the top can influence organizational outcomes (Jensen and Zajac, 2004). Recently, there is an emerging research stream that specifically focuses on an important structure at the top: the presence of a chief operating officer (COO)/president who is separate from a CEO, and examines the performance consequences (accounting performance and stock market reactions) of this structure and the tenure outcomes of the Keywords: presence of a separate COO/president; CEO dismissal; strategic change *Correspondence to: Yan Zhang, Jesse H. Jones Graduate School of Management, Rice University, 6100 Main Street, Houston, TX 77005, U.S.A. E-mail: yanzh@rice.edu COO/president (e.g., Cannella and Shen, 2001;Davidson, Nemec, and Worrell, 2001;Hambrick and Cannella, 2004;Heenan and Bennis, 1999;Levinson, 1993;Shen and Cannella, 2003).There can be two separate roles of a COO/president: one representing an heir apparent in training for the CEO position and the other representing a co-leader delegated with internal operating authority. From a co-leader perspective, Hambrick and Cannella (2004: 959) argued that 'the decision to have a COO represents a major structural choice: it explicitly divides between two people a set of toplevel roles that are typically fulfilled by one person; it draws a structural distinction between strategy formulation and implementation; it adds an organizational layer; and it adds a highly-paid executive position to the organization's costs.' From a succession (heir apparent) perspective, Vancil (1987) found that many firms identified an heir apparent in the COO and/or president position in advance of the actual succession event and used this position to groom the next CEO. Findings of

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Section: Theory Development a Coo/president As A Partner To A Ceomentioning

confidence: 99%

The presence of a separate COO/president and its impact on strategic change and CEO dismissal

Zhang

2006

Strategic Management Journal

197

171

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“…Agency problems typically emerge because of the two fundamental conditions that underlie principal-agent relationships: goal incongruence and information asymmetry (Zajac, 1990). Goal congruence is an assumed condition, without which the agency problem reduces to a more easily solvable contracting problem.…”

Section: Strategic Complexity and Monitoringmentioning

confidence: 99%

The Costs and Benefits of Managerial Incentives and Monitoring in Large U.S. Corporations: When is More not Better?

1994

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“…There is plenty of evidence drawing attention to the high level of information asymmetry that exists between outside stakeholders and inside managers (Zajac, 1990;Shen and Cannella, 2003;Zhang, 2008;Graffin et al, 2011). M&As are associated with information asymmetry because choices regarding the upcoming deal are typically made behind closed doors, and information about the way an organization goes about making M&A choices is rarely shared (Gomes et al 2012, Gomes et al 2013.…”

Section: Interim News Events In Contexts Associated With Information mentioning

confidence: 99%

Voluntary Disclosures as a form of Impression Management to Reduce Evaluative Uncertainty During M&A

Yakis‐Douglas

Angwin

Meadows

et al. 2014

AMPROC

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This study develops and tests a set of hypotheses on how to manage investors' evaluative uncertainty during M&A through a specific form of impression management, namely, interim news events. We suggest that voluntary disclosures are key in influencing investors' reactions during M&A. Empirical support for our theoretical arguments is shown in a sample of 36,376 deals and 163,023 associated interim news events carried out by NYSE and NSDQ listed organizations over 10 years. Our research contributes to literature on voluntary disclosures, impression management, and managing M&A. Key words: M&A; voluntary disclosures; evaluative uncertainty INTRODUCTIONThere is significant information asymmetry between outside investors and inside managers (Miller and Rock, 1985;Myers and Majluf, 1984). In contexts associated with information asymmetry, investors are faced with evaluative uncertainty (Fiske and Taylor, 2008;Moskowitz, 2005). Evaluative uncertainty refers to the absence of clear and unambiguous indicators or benchmarks of performance (Graffin and Ward, 2010). Unfavourable consequences for organizations regarding information asymmetry and evaluative uncertainty are tied to adverse selection (Akerlof, 1970), negative impact on stock (Copeland and Galai, 1983;Glosten and Milgrom, 1985) and undesirable effects on the cost of capital (Baiman and Verrecchia, 1995;Leuz and Verrecchia, 2000). 15879 2 A critical situation in which stakeholders are likely to face high levels of evaluative uncertainty is merger and acquisition (M&A) deals. This is because M&A are contexts associated with high information asymmetry (Reuer, Tong, and Wu, 2012; Boeh, 2011). M&A can play a vital role in the success and failure of organizations, so investors' ability to evaluate them is of great importance. Managers who have detailed knowledge of the M&A deal may reduce this asymmetry and manage evaluative uncertainty by voluntarily disclosing information to investors which in turn is likely to impact on their decisions about the value of the firm (Narayanan, Pinches, Kelm, and Lander, 2000). To deal with these asymmetries, organization leaders actively manage their firm's informational environment, and do so in ways they hope will favourably affect the impressions of targeted stakeholders (Puffer and Weintrop, 1991;Zajac and Westphal, 1995;Graffin, Carpenter, and Boivie, 2011). Information asymmetry is traditionally seen as the main reason why managers should disclose voluntary information to the market (Avallone and Ramassa, 2011). Any such action which is carried out with the intent of influencing an audience's perception of the organization is called organizational impression management (Elsbach, Sutton, and Principe, 1998).Scholars have studied impression management in various contexts such as executive compensation (Zajac and Westphal, 1995;Wade, Porac, and Pollock, 1997;Porac, Wade, and Pollock, 1999), strategic change (Gioia and Chittipeddi, 1991;Fiss and Zajac, 2006), and more recently CEO succession (Graffin et al, 2011). However,...

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Ceo selection, succession, compensation and firm performance: A theoretical integration and empirical analysis

Cited by 399 publications

References 32 publications

The presence of a separate COO/president and its impact on strategic change and CEO dismissal

The presence of a separate COO/president and its impact on strategic change and CEO dismissal

The Costs and Benefits of Managerial Incentives and Monitoring in Large U.S. Corporations: When is More not Better?

Voluntary Disclosures as a form of Impression Management to Reduce Evaluative Uncertainty During M&A

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