How to strike a balance between CEO compensation and strategic risk? A longitudinal analysis

Olson, Bradley J.; Parayitam, Satyanarayana; Skousen, Bradley; Skousen, Christopher J.

doi:10.1108/jsma-08-2017-0055

Cited by 2 publications

(2 citation statements)

References 85 publications

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“…The company board is constituted to reduce the cost associated with conflict between owners and management (Ashfaq & Rui, 2018) and taking into account the concerns relating to stakeholders. The shareholders main interest is to maximise firm value while the interest of the management is to maximise their benefits (Olson et al, 2018). In this situation, CG mechanisms are usually introduced to deal with this condition and minimise the conflict.…”

Section: Interaction Effect Of Board Independencementioning

confidence: 99%

The Interaction Effect of Independent Boards on Corporate Governance-Corporate Social Responsibility (CG-CSR) and Performance Nexus

Karim

Manab

Ismail

2020

AAMJ

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The financial crises over the past two decades were identified as the main reason for the economic collapse. Malaysia suffered the same fate when many organisations crumpled from inappropriate compliance of governance mechanisms and corporate social responsibility (CSR) disclosure practices. Given this condition, this study intends to examine the effects of governance mechanisms and CSR practice on firm performance and the moderating effect of board independence is investigated on corporate governance-CSR (CG-CSR) and performance nexus of 588 Malaysian companies listed on Bursa Malaysia between 2006 and 2017. Both accounting-based (ROA) and market-based (Tobin’s Q) performance measures have been used for measuring performance. Dynamic model using Generalized Method of Moments (GMM) has been employed on the dataset to control for potential endogeneity, reverse causality, and dynamic heterogeneity. Findings indicate that ownership concentration negatively affects ROA; chief executive officer (CEO) duality positively affects ROA and negatively affects Tobin’s Q. Moreover, investment on CSR is negatively related to both performance measures. Finally, board independence negatively moderates the CG mechanisms, CSR practice, and performance relationship. Findings of the study have implications for Bursa Malaysia and Securities Commission Malaysia to reset the limit of independent directors on board so that their unnecessary interference in operations of management may be avoided. Furthermore, companies need to reassess their CSR strategies whether they are spending on CSR activities or hiding their financial malfeasance in the name of investment on CSR.

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Section: Interaction Effect Of Board Independencementioning

confidence: 99%

The Interaction Effect of Independent Boards on Corporate Governance-Corporate Social Responsibility (CG-CSR) and Performance Nexus

Karim

Manab

Ismail

2020

AAMJ

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“…Moreover, long-serving CEOs have a great psychological and tangible investment in the firm; they have obtained firm-specific human capital that may be lost due to failures in excessive risk taking (McClelland et al, 2012). Therefore, risk aversion leads long-serving CEOs to resist high-risk activities that can bring potentially higher returns and favor low-risk activities that can bring lower yet less uncertain returns (Olson et al, 2018). Exploitative innovations are developed through a linear and more predictable process, and they are often in the form of incremental improvements (Vagnani, 2015).…”

Section: Ceo-chair Dualitymentioning

confidence: 99%

Effects of CEO duality and tenure on innovation

Yang

2019

JSMA

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Purpose As the primary decision makers, chief executive officers (CEOs) play pivotal roles in firm innovation. However, little is known regarding how CEOs influence the exploitation and exploration paradox. To advance theory and research, the purpose of this paper is to investigate the joint effects of CEO tenure and CEO–chair duality on a firm’s shifting emphasis between exploitative and exploratory innovation. Design/methodology/approach This paper takes the approach of a longitudinal sample of 81 US pharmaceutical firms. Findings As CEOs’ tenure advance, their firms’ percentage of exploitative innovation increases. Furthermore, non-duality (separation of board chair and CEO) further strengthens the positive relationship between CEO tenure and the percentage of exploitative innovation. Research limitations/implications This study integrates upper echelons theory and behavioral agency theory to juxtapose the effects of CEOs on technological innovation. This study extends knowledge of strategic leadership and innovation by showing that CEOs influence the balance between exploitative and exploratory innovation. Furthermore, this study also contributes to the corporate governance literature by demonstrating that monitoring vigilance could inhibit capable CEOs from pursuing more exploratory innovation. Practical implications Boards of directors should allow CEOs to have greater discretion over innovation, and vigilant monitoring and control may force CEOs to focus less on exploration. Originality/value This is one of the few studies that explicitly investigate how CEO influences a firm’s emphasis on exploitative innovation and exploratory innovation.

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How to strike a balance between CEO compensation and strategic risk? A longitudinal analysis

Cited by 2 publications

References 85 publications

The Interaction Effect of Independent Boards on Corporate Governance-Corporate Social Responsibility (CG-CSR) and Performance Nexus

The Interaction Effect of Independent Boards on Corporate Governance-Corporate Social Responsibility (CG-CSR) and Performance Nexus

Effects of CEO duality and tenure on innovation

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