Session 352

CEO Decision Making

Track P

Date: Monday, September 22, 2014

Track X

Time: 11:00 – 12:15

Paper

Room: Monaco


Session Chair:

  • Robert Hoskisson, Rice University

Title: CEO Human and Social Capital and Corporate Divestitures: An Investigation of Endowment Effects

Authors

  • Shih-Chi Chiu, Nanyang Technological University
  • Robert Hoskisson, Rice University
  • Seemantini Pathak, University of Missouri - St. Louis
  • Richard Johnson, University of Missouri

Abstract: This study contributes to the restructuring literature by examining the underexplored psychological impact of the endowment effect in CEOs’ decision making during corporate divestiture. We propose that psychological bias associated with the endowment effect leads to lower levels of divestiture intensity. Specifically, we argue that CEO position tenure and industry tenure are negatively associated with a firm’s divestiture intensity, whereas CEO board memberships lead to greater intensity of divestitures. Our theoretical model further examines the presence of financial advisors as a moderator in mitigating CEO endowment effect during restructuring. Our results, based on data from 230 restructuring programs executed in the United States between 1986 and 2009, show that the endowment effect can explain the variation in firms’ divestment decisions during restructuring.

Title: Improving with Age: Sources of Managerial Sensing Capabilities

Authors

  • Daniel Mack, INSEAD
  • Theresa Cho, Seoul National University
  • Andrew Yi, Sungkyunkwan University

Abstract: As the dominant decision-maker of an organization, a CEO brings a set of skills and competencies beneficial to the firm to the extent that his skill set matches the conditions faced by the firm. Strategy researchers have particularly been interested in the effects of CEO tenure, arguing that a CEO is most effective during his or her earlier years in office, but his performance deteriorates soon after (Hambrick & Fukutomi, 1991; Miller & Shamsie, 2001). Using a sample of 79 U.S banks prior to the financial crisis, we examine the influence of CEO tenure on the firm’s ability to recognize threat in the declining environment.

Title: Possessed by Possessions: The Organizational Implications of CEO Materialism

Authors

  • Adam Wowak, University of Notre Dame
  • Patrick Maggitti, Villanova University
  • Qiang Li, Hong Kong University of Science and Technology

Abstract: The concept of economic self-interest plays a central role in most models of CEO decision making, which tend to assume that CEOs are uniformly driven to acquire and protect material wealth. But if CEOs vary in the relative value they place on possessions, they will also vary in their decisions and behaviors. In this study we examine how materialism, or the value placed on material possessions, affects CEOs’ decisions and behaviors. We argue that CEO materialism will lead to more corporate acquisitions, fewer corporate divestitures, and a less democratic TMT work environment. We also propose that CEO compensation will moderate these relationships. We test our ideas on a sample that combines survey data from 61 CEOs and their TMTs with longitudinal archival company financial data.

Title: The Effects of CEO Over(under)pay and Relative Performance on Firm Strategic Behaviors

Authors

  • Daniel Zyung, Rice University
  • Gerry Sanders, University of Texas - San Antonio
  • Yan Anthea Zhang, Rice University

Abstract: In this study, we argue and find that CEOs who have received exceedingly high total compensation throughout their company tenure have higher tendency to engage in risky behaviors—manifest in voluminous investments and dynamic and nonconforming resource allocation strategies. This effect is more salient when the firm’s relative performance is greater. We also find that underpaid CEOs far below the average tend to engage in large betting through sizable investments and bold experimentation. It is proposed that underlying these seemingly symmetric behaviors which had originated from asymmetric pay packages are different cognitive processes—overconfidence developed from inflated self-attribution of organizational success as opposed to reckless betting as an attempt to reduce the substantial pay lag. We conclude by discussing implications for theory and future research.

All Sessions in Track P...

Sun: 08:00 – 09:15
Session 459: Theoretical Foundations of Behavioral Strategy I
Sun: 09:30 – 10:45
Session 460: Theoretical Foundations of Behavioral Strategy II
Sun: 11:15 – 12:30
Session 461: Theoretical Foundations of Behavioral Strategy III
Sun: 15:45 – 17:00
Session 360: Heuristics and Biases in Strategy Choices
Session 363: Social Influence & Comparisons
Sun: 17:15 – 18:30
Session 612: Behavioral Strategy IG Business Meeting
Mon: 08:00 – 09:15
Session 354: Goals and Aspirations
Mon: 11:00 – 12:15
Session 352: CEO Decision Making
Mon: 14:45 – 16:00
Session 265: Learning, Search, Slack: The behavioral theory revisited
Session 353: Behavioral Foundations of Mergers & Acquisitions
Mon: 16:30 – 17:45
Session 359: Cognition Under Uncertainty & Risk Taking
Tue: 08:00 – 09:15
Session 358: Cognitive Processes in Strategy
Session 362: Search for Better Strategies
Tue: 11:00 – 12:15
Session 361: Creativity and Innovation
Tue: 15:30 – 16:45
Session 355: Behavioral Elements of Institutional Theory
Session 453: Competitive Dynamics
Tue: 17:15 – 18:30
Session 356: Affective and Cognitive Processes in Strategy
Session 357: Learning Processes

All Sessions in Track X...

Sun: 13:45 – 14:30
Session 295: Keynote: Lifetime Achievement Award
Sun: 14:30 – 15:15
Session 471: Keynote: CK Prahalad Award
Sun: 15:45 – 17:00
Session 203: Acquisition Implementation
Session 215: Yikes: What Now (Reloaded)?: Firm Responses to Stakeholder Activism
Session 398: Corporate Strategy and Corporate Finance: Continuing the Research Conversation
Mon: 08:00 – 09:15
Session 260: IPRs, Appropriability and Innovation
Session 338: Making Strategy, Strategic Change and the Role of Sensemaking and Sensegiving
Mon: 09:30 – 10:30
Session 296: How Social Networks Create Competitive Advantage: The Microfoundations Reputation
Mon: 11:00 – 12:15
Session 213: What is In It For Us? How Sustainability Matters for Firm Strategy
Session 352: CEO Decision Making
Session 405: Multi-Sided Platform Strategies
Mon: 13:30 – 14:30
Session 4: Business Models in their Competitive Context
Session 5: Building Strategic States
Session 298: Using Networks to Shape Strategy
Session 299: Dealing with the Euro Area Economic Crisis: Strategic Adjustment in the Period of Turmoil
Session 300: Methodological and Conceptual Frontiers in the New World of Networks
Mon: 14:45 – 16:00
Session 368: Firm Scope and Industry Competition
Session 375: Changing External Environments: How do Multinationals Respond?
Mon: 16:30 – 17:45
Session 245: Human Capital Complementarities
Session 344: Paradoxical Tensions and Innovative Strategies
Tue: 08:00 – 09:15
Session 409: Increasing the Relevance of Strategy Research
Session 446: Empirical Studies and Case Studies of Business Models
Tue: 09:30 – 10:30
Session 297: Granularity of Profit
Tue: 11:00 – 12:15
Session 469: M&As and Innovation
Tue: 14:15 – 15:15
Session 301: Strategy Frameworks: In Quest of Relevance in a Turbulent World
Session 302: Directing Strategy: The Process Challenges of Formulating and Implementing Strategy in a World of Networks
Session 470: Governance Challenges in Globalized Networks
Session 473: Rethinking the Architecture of Global Corporations
Tue: 15:30 – 16:45
Session 208: Interactions, Recombination and Adaptation Processes
Session 346: Management and Strategy Practices Reconsidered
Tue: 17:15 – 18:30
Session 441: Funding Entrepreneurial Ventures: Sources and Successes


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