No abstract is available for this article.
No abstract is available for this article.
No abstract is available for this article.
On August 19, 2019, the Business Roundtable (2019) released a statement signed by 181 chief executive officers (CEOs) of well-known US corporations, in which they pledged “a fundamental commitment” to “deliver value to all” stakeholders. This study examines the stock market reaction to this new statement on the purpose of a corporation.
Based on a sample of 163 publicly listed companies that signed the pledge, the results show that investors react positively to a firm's pledge in the days surrounding the statement release. The consensus among stock market investors was robust, characterized by the low volatility in the share price post-announcement date. The decision by these companies, though intended to maximize the wealth of all stakeholders, rather than shareholders alone, carries an opportunity cost. Specifically, a post-announcement decline in share buybacks by pledge firms relative to control firms is observed, though investors embracing stakeholder theory appear undeterred by the reduction in distributions.
This study provides empirical support that, in the evolving business environment, companies must emphasize issues that concern customers, employees, non-governmental organizations (NGOs), and the government. Failure to prioritize these issues may engender public backlash, especially in the age of social media. However, the attention to stakeholders is compatible with the focus on shareholder performance. Performance suffers when customers leave, workers feel dissatisfied, NGOs call for boycotts, and governments levy fines. Corporations seeking to increase shareholder wealth will need to fully embrace stakeholder concerns.
This study shows that adopting a stakeholder perspective unlocked value that would not have been achieved had the focus remained on shareholder primacy. The excess values may derive from greater customer loyalty, improved employee motivation, better supplier relations, supportive financiers, maximizing revenue, minimizing costs, and/or yielding higher profits. Shareholders anticipate greater long-term value from companies emphasizing employees, communities, supply chain, financiers, and shareholders.
Based on Property Rights Theory and Empowerment Theory, this paper uses the establishment of local State-Owned Assets Supervision and Administration Commissions (SASACs) as a quasi-natural experiment to investigate whether and how SASACs improve the efficiency of state-owned enterprises (SOEs).
(1) After the establishment of SASACs, and compared to those not supervised by the SASACs (i.e., the control group), SOEs governed by local SASACs (i.e., the treatment group) have experienced a significant increase in decentralization and empowerment from the government, proxied by corporate pyramid levels. We also find increased pay-performance sensitivity for SOE managers and higher productivity measured by total factor productivity (TFP). (2) SASACs adopt different strategies to manage SOEs in monopolistic and competitive industries. (3) The above effect of the SASACs is more pronounced in SOEs supervised by high-quality governments that effectively protect property rights, enforce fair contracts, apply laws and regulations to everyone, and sufficiently refrain from expropriation.
Using a quasi-natural experiment, this paper expands the existing literature on SOE reform from the perspective of incentive reform at the regulatory level based on Property Rights Theory and Empowerment Theory.
(1) Privatization is not necessarily the only optimal solution for SOE reform. We show that the unification of power and responsibilities can be very effective and is perhaps less costly and more practical than privatization. Thus, our study provides an encouraging solution for SOE reform for other countries. (2) Countries experiencing SOE reform should also work on strengthening their government quality in order to fully maximize the benefit of the reform.
Although both cognitive conflict and cohesiveness are quintessential for a supervisory board to fulfill its monitoring and advisory role, cognitive conflict may equally create tension that negatively affects board cohesiveness and performance. How boards manage this tension between conflict and cohesiveness is the key concern of this paper.
Analysis of the multicase data from 17 Dutch two-tier supervisory boards reveals that how boards manage the tension between conflict and cohesiveness depends on three attributes: (a) board cohesiveness, (b) the board's conflict norms formation and (c) the board's dominant conflict management style. These attributes shape volatile board conflict climates. Four conflict climates are identified: (a) compliance climate, (b) pseudocohesive climate, (c) conflict climate, and (d) agree-to-disagree climate.
Our study makes three contributions. First, it suggests that boards avoid conflict but are nonetheless often not cohesive. Second, it reveals that boards have conflict management styles that include action patterns distinct from those reported in the extant literature since these patterns emerged from exploring what board members think and feel but do not openly say. Third, we develop new insights into how boards implicitly and continuously form conflict norms and propose that boards require explicit, conscious, and shared conflict norms to enact productive conflict management action patterns.
A conceptual model is proposed that facilitates reflection of board decision-making and effectiveness and that maps out actions the boards can take to address the tension between cognitive conflict and cohesiveness.
We approach the ongoing debate in the literature on when and why a female leadership advantage exists in the context of China. In particular, we examine whether female CEOs outperform male CEOs in state-owned enterprises (SOEs).
We show that a female leadership advantage exists in SOEs. We find that the female leadership increased performance is attributed to improved profitability, capital structure, and operating efficiency. The magnitude of this gender effect is bigger in central state-owned enterprises (CSOEs) than that in local state-owned enterprises (LSOEs). The results are robust to additional tests that mitigate the sample selection and other endogeneity concerns.
We use the role congruity theory to motivate and develop the hypotheses drawing insights upon the literature in psychology and leadership. Female CEOs are perceived as less congruent with their leadership roles given the gender role stereotypes. Thus, they face more challenges and difficulties than male CEOs. These obstacles take at least two forms which are significant in SOEs: shareholder activism and sex discrimination. Female CEOs have to outperform their male counterparts to alleviate the pressure from shareholder activism and showcase their managerial skills and abilities.
For the state shareholders, the extra scrutiny in selecting female CEOs should be lifted given this outperformance. The evidence is also relevant for CEOs to choose their career paths among different types of firms, for boards of directors on their strategic decisions on CEO hiring, and for policy makers to promote the female leadership advantage.
We examine how countries' cultural and legal environment, in addition to firm-level governance mechanisms, affects firms' retention and termination decision of the CEO.
Previous research focuses primarily on the effects of governance structures and incentives on turnover. In this paper, we focus on two additional institutions—cultural and legal. We find that in cultures characterized by higher individualism, competition, and stronger views that hard work leads to success, boards are more likely to replace CEOs in response to poor shareholder performance. Conversely, we find that in more corrupt cultures and cultures more protective of employees, there is lower turnover–performance sensitivity.
Williamson (2000) provided a framework consisting of four levels of institutional influences on economic activity: (1) cultural norms, (2) the legal system, (3) governance structures, and (4) resource allocation and employment. Previous research focuses primarily on the two highest levels; we focus on the two more basic levels, cultural and legal, while controlling for firm-level governance.
Cultural values and legal conditions combine with the firm's governance structure to affect CEO turnover and its sensitivity to firm shareholder performance.
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