CEO vs. COO: shareholder perceptions of M&A announcements based on insider trades

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vinh Huy Nguyen ◽  
Carolina Gomez ◽  
Suchi Mishra ◽  
Ali M. Parhizgari
Keyword(s):  
Stock Price ◽  
Fixed Effects ◽  
Economic Recession ◽  
Chief Executive ◽  
Positive Influence ◽  
Past Performance ◽  
Industry Growth ◽  
Content Type ◽  
Chief Operating Officer ◽  
Regression Tests

PurposeWe examine how the net share purchases of top executives of acquiring firms, specifically the Chief Executive Officer (CEO) and the Chief Operating Officer (COO), can impact shareholder perceptions of a merger and acquisition (M&A) around the announcement time.Design/methodology/approachRegression tests using the post-announcement cumulative returns as the dependent variables, and CEO and COO net purchases as independent test controlling for the net purchases of all other insiders, COO and CEO ownership, exercised options, unexercised exercisable options, merger type, pre-announcement firm size, past performance, industry growth, industry instability, year and industry fixed effects. The regression tests are used for various sub-samples (i.e. non-contemporaneous events, duality, operational complexity, economic conditions).FindingsWe find that overall shareholders value the COO's net purchases before the announcement but not those of the CEOs. If the COO is also the CEO, then executive buy-ins appear to have a negative reaction from the shareholders. When the firm has many business segments or when the announcement is made in an economic recession, the COO's net purchases do not have a positive influence on the shareholders.Originality/valueWe are the first to provide evidence that investors pay attention to the COO around M&A announcements. In the age of celebrity CEOs, who can instantaneously change the stock price with one press release, having another executive that can shape the opinion of investors can diversify the agency risk.

Managerial overconfidence, firm transparency, and stock price crash risk

2019 ◽  
Vol 10 (3) ◽  
pp. 271-296
Author(s):  
Quanxi Liang ◽  
Leng Ling ◽  
Jingjing Tang ◽  
Haijian Zeng ◽  
Mingming Zhuang
Keyword(s):  
Stock Price ◽  
Fixed Effects ◽  
Multiple Linear Regression Model ◽  
Chief Executive ◽  
Bad News ◽  
Good News ◽  
Crash Risk ◽  
Fixed Effects Model ◽  
Content Type ◽  
Managerial Overconfidence

Purpose The purpose of this paper is to empirically analyze whether and how managerial overconfidence affects stock price crash risk. Design/methodology/approach Based on a large sample of Chinese non-state-owned firms from 2000 to 2012, this study employs methods including multiple linear regression model, Heckman two-stage treatment effect procedure, firm fixed effects model and event study to clarify the causality relationship between managerial overconfidence and crash risk. Findings The authors find that firms with overconfident managers (chief executive officer or board chairs) are more likely to experience future stock price crashes than firms with non-overconfident managers. The effect of overconfidence on crash risk is more pronounced for firms with low transparency, suggesting that firm opacity facilitates overconfident managers’ bad news hoarding activities, which, in turn, increases stock price crash risk. The authors also show evidence that overconfident managers tend to disclose good news in a timely manner. Originality/value The authors add to the growing literature on stock price crash risk. Specifically, the authors find that the cognitive bias of board chair plays an important role in the bad news hoarding activities, thereby increasing the likelihood of stock price crash. This study also contributes to the literature that addresses the effects of managerial overconfidence on corporate finance issues.

Good times, bad times: the stock market performance of firms that own high value brands

2016 ◽  
Vol 50 (5/6) ◽  
pp. 670-694 ◽  
Author(s):  
Kevin Voss ◽  
Mayoor Mohan
Keyword(s):  
Chief Executive Officers ◽  
Stock Price ◽  
Ad Hoc ◽  
Chief Executive ◽  
Share Price ◽  
Content Type ◽  
Price Performance ◽  
Stock Market Performance ◽  
Using Data ◽  
Executive Officers

Purpose The purpose of the this paper is to correct a deficiency in the published literature by examining the share price performance of firms that own high-value brands in uptrending, downtrending and sideways markets. Design/methodology/approach The authors examined stock price performance for an index of firms that owned brands in the Interbrand list of the “Best Global Brands” from 2001 through 2009 using the Fama-French method. Findings The authors’ index outperformed the Standard & Poor’s 500 when the market was up or downtrending, but not when it moved sideways. Research limitations/implications The authors find that an index of firms that own the produced better returns than the Standard & Poor’s 500 market index. Owning highly valued brands may be a marketplace signal to the investing community regarding the firm’s management acumen. Practical implications Owning high-value brands seems to influence share price performance, a metric used to judge chief executive officers. Thus, brand investments align with the shareholders’ interest. The authors help alleviate the perception (Challagalla et al., 2014) that marketing managers make investments on an ad hoc basis. Originality/value For the first time, the authors evaluate the effect of owning one or more of the world’s most valuable brands on the market value of common stock using data from downtrending, uptrending and no-trend periods. This research is also among the first to introduce volatility into the Fama-French method and it is an important explanatory variable. This paper’s approach has interesting comparisons to other papers taking a similar analytical approach.

Reflecting or ruminating: listening to the regrets of life science leaders

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Helen Mary Meldrum
Keyword(s):  
Chief Executive Officers ◽  
Life Science ◽  
Negative Emotion ◽  
Chief Executive ◽  
Positive Influence ◽  
Lessons Learned ◽  
Business Leaders ◽  
Content Type ◽  
The Usa ◽  
Executive Officers

PurposeThe overwhelming frequency of failure in trying to bring a safe and effective biotech, pharmaceutical or medical device product to market is truly astounding. This research synthesizes industry leaders' insights on lessons learned from reflecting on professional disappointments.Design/methodology/approachThis research used a qualitative approach to learning from the Chief Executive Officers (CEOs), Chief Scientific Officers (CSOs) and Chief Medical Officers (CMOs) of the most successful life science firms in the USA. A total of 45 industry leaders were interviewed regarding their lingering regrets about their career misadventures.FindingsRegrets were unavoidable because there were opportunity costs for every choice each leader made. Commentary about wisdom gained comprised themes regarding valuable time lost, strategies that could have been enacted, products that failed and essential personnel who were not managed optimally. Contrary to expectations, there was little mention of money that was squandered.Originality/valueNot felt as a solely negative emotion, regrets were recognized by these leaders as a potentially positive influence on their future decisions. Not felt as a solely negative emotion, regret was recognized by these leaders as a potentially positive influence on their future decisions. This exploratory study suggests that learning from retrospective and anticipated regrets benefits life science leaders in gaining clarity of thought regarding their current business challenges. Because prior research on the value of psychological regrets has mostly relied on limited samples, this inquiry contributes a new vantage point by examining a unique population of senior business leaders, thus providing broader applicability to the organizational literature.

Does the second wave of COVID-19 undermine corporate immunity? International evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huy Viet Hoang ◽  
Cuong Nguyen ◽  
Khanh Hoang
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Fixed Effects ◽  
Management Strategies ◽  
The United States ◽  
Least Square ◽  
Content Type ◽  
The Impact ◽  
Second Wave ◽  
Practical Implications

PurposeThis study compares the impact of the COVID-19 pandemic on stock returns in the first two waves of infection across selected markets, given built-in corporate immunity before the global outbreak.Design/methodology/approachThe data are collected from listed firms in five markets that have experienced the second wave of COVID-19 contagion, namely the United States (US), Australia, China, Hong Kong and South Korea. The period of investigation in this study ranges from January 24 to August 28, 2020 to cover the first two COVID-19 waves in selected markets. The study estimates the research model by employing the ordinary least square method with fixed effects to control for the heterogeneity that may confound the empirical outcomes.FindingsThe analysis reveals that firms with larger size and more cash reserves before the COVID-19 outbreak have better stock performance under the first wave; however, these advantages impede stock resilience during the second wave. Corporate governance practices significantly influence stock returns only in the first wave as their effects fade when the second wave emerges. The results also suggest that in economies with greater power distance, although stock price depreciation was milder in the first wave, it is more intense when new cases again surge after the first wave was contained.Practical implicationsThis paper provides practical implications for corporate managers, policymakers and governments concerning crisis management strategies for COVID-19 and future pandemics.Originality/valueThis study is the first to evaluate built-in corporate immunity before the COVID-19 shock under successive contagious waves. Besides, this study accentuates the importance of cultural understanding in weathering the ongoing pandemic across different markets.

Executives with customer experience and firm performance in the B2B context

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Cong Feng ◽  
Jiong Sun ◽  
Yiwei Fang ◽  
Iftekhar Hasan
Keyword(s):  
Firm Performance ◽  
Fixed Effects ◽  
Customer Orientation ◽  
Chief Executive ◽  
Customer Experience ◽  
Content Type ◽  
Marketing Function ◽  
Chief Marketing Officer ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to examine the presence of an executive with customer experience (ECE) in a supplier firm’s top management team (TMT). The role of ECE presence remains understudied in the marketing literature. This study attempts to examine the relationship between ECE presence and firm performance. Design/methodology/approach This paper draws on the resource-based view of the firm and adopts a panel firm fixed effects estimator to test the proposed hypotheses. The empirical analysis uses a sample of 1,974 firm-year observations with 489 unique supplier firms. Selection-induced endogeneity is mitigated through the Heckman procedure. Findings ECE presence improves firm performance. Additionally, firms benefit less from ECE presence if a board member with customer experience (BCE) is also present, if a chief executive officer commands a higher pay slice (compared to other executives), and if a TMT is more functionally diversified. However, ECE presence is particularly beneficial if the overall economy is in contraction. Comparing the functional positions held by ECEs reveals that ECE in the marketing function (as a chief marketing officer) offers the largest benefit to an average supplier firm. ECE presence is also associated with other firm outcomes (e.g. bankruptcy odds, innovation and customer orientation). Research limitations/implications This study makes four contributions to the literature. First, this research contributes to existing studies that investigate marketing expertise in the upper corporate pyramid. Second, the study contributes to the burgeoning body of work across business disciplines that attempt to understand the impact of CxOs on firm performance. Third, the study contributes to the vast literature on customer orientation indirectly. Finally, this paper contributes to the broader literature studying the influence of board and TMT characteristics. Practical implications The findings are of particular importance to business-to-business firms. This paper shows that suppliers can benefit significantly from managers with customer experience. Four contingency factors moderate the relationship between ECE presence and firm performance. Among the various functional positions held by an ECE, the findings suggest that hiring an ECE for the marketing functional area is the most beneficial. ECE stands out as a better option for a company than BCE to improve firm performance. ECE presence is also associated with bankruptcy odds, innovation and customer orientation. Originality/value This paper provides the first empirical evidence regarding how ECE affects firm performance and also extends prior research on the value of human capital in TMT.

Intellectual capital and dividend policy: the effect of CEO characteristics

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Enrico Battisti ◽  
Niccolò Nirino ◽  
Michael Christofi ◽  
Demetris Vrontis
Keyword(s):  
Intellectual Capital ◽  
Fixed Effects ◽  
Dividend Policy ◽  
Positive Impact ◽  
Panel Data Analysis ◽  
Chief Executive ◽  
Moderator Effect ◽  
Content Type ◽  
The Impact ◽  
Ceo Characteristics

PurposeThe paper aims to empirically test the impact of intellectual capital (IC) on a firm's dividend policy. Further, the authors investigate the moderator effect of Chief Executive Officer's (CEO) characteristics (gender, age and education) on this relationship.Design/methodology/approachThe research was carried out on the main Chinese listed companies reported on the CSI 100 Index from 2016 to 2018. To assess the impact of IC on the dividend policy and then the moderating effect of the characteristics of the CEOs, the authors used a fixed effects panel data analysis.FindingsThe results suggest a positive impact of IC on dividend policies. In addition, this relationship is enhanced when the CEO is a woman, and the lower the age the higher the effect is.Originality/valueTo the best of the authors' knowledge, this is the first empirical study that explores the effect of IC on a firm's dividend policy in an emerging country. Specifically, this paper demonstrates the impact that IC has on the creation of shareholder value. Furthermore, considering the characteristics of the CEOs, this study tests new moderating effects in the relationship between IC and value creation and highlights how IC, dividends and CEO characteristics can be useful in aligning interests between ownership and management, enriching the debate on agency theory.

scholarly journals Supplier-initiated ingredient/component branding

2020 ◽  
Vol 35 (6) ◽  
pp. 1023-1035
Author(s):  
Abdullah M. Aljafari ◽  
Tom J. Brown
Keyword(s):  
Chief Executive Officers ◽  
Structural Equation ◽  
Chief Executive ◽  
Functional Differentiation ◽  
Positive Influence ◽  
Equation Modeling ◽  
Manufacturing Companies ◽  
Content Type ◽  
Specific Order ◽  
Executive Officers

Purpose This paper aims to understand the process of initiating ingredient/component (IC) branding from the supplier's perspective. It proposes modeling entrepreneurial orientation (EO) as an antecedent factor and differentiation abilities (functional and reputational) as mediators. Investigating IC branding from the supplier's perspective is critical given the cost and risk associated with implementing such a strategy. Design/methodology/approach A total of 5,254 manufacturing companies were screened to identify IC supplier firms that meet certain criteria. Survey data were collected from 77 top managers (Chief Executive Officers or Chief Marketing Officers) of IC supplier firms. The paper uses partial least squares structural equation modeling (PLS-SEM) and SPSS in analyzing data. Findings The results indicate that IC branding is a complex strategy – one involving a number of steps that need to be taken in a specific order. More specifically, results indicate that IC branding starts with EO exerting a positive influence on IC functional differentiation ability (FDA). FDA facilitates reputational differentiation ability (RDA), which in turn encourages the supplier to initiate IC branding. Originality/value This paper addresses an important gap by studying the process through, which suppliers initiate IC branding.

Crash risk and debt maturity: evidence from Australia

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mostafa Hasan ◽  
Dewan Rahman ◽  
Grantley Taylor ◽  
Barry Oliver
Keyword(s):  
Stock Price ◽  
Fixed Effects ◽  
Positive Association ◽  
Debt Maturity ◽  
Crash Risk ◽  
Content Type ◽  
Panel Data Estimation ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Data Estimation

PurposeThe purpose of this paper is to examine the association between debt maturity structure and stock price crash risk in Australia.Design/methodology/approachThe authors employ panel data estimation with industry and year fixed effects. The paper uses a sample of 1,548 publicly listed Australian firms (8,661 firm-year observations) covering the 2000–2015 period.FindingsStock price crash risk is positively and significantly associated with the long-term debt maturity structure of firms. In addition, this positive association is more pronounced for firms with a more opaque information environment.Originality/valueThis is the first study to examine stock price crash risk in Australia. The findings are value relevant as it uncovers how debt maturity structure affects shareholders' wealth protection.

Do tournament incentives motivate chief executive officers to be socially responsible?

2020 ◽  
Vol 35 (5) ◽  
pp. 597-619
Author(s):  
Shahid Ali ◽  
Junrui Zhang ◽  
Muhammad Usman ◽  
Muhammad Kaleem Khan ◽  
Farman Ullah Khan ◽  
...  
Keyword(s):  
Social Responsibility ◽  
Least Squares ◽  
Chief Executive Officers ◽  
Fixed Effects ◽  
Chief Executive ◽  
Ordinary Least Squares ◽  
Socially Responsible ◽  
Content Type ◽  
Tournament Theory ◽  
Executive Officers

Purpose This study aims to investigate the question concerning whether tournament incentives motivate chief executive officers (CEOs) to be socially responsible. Design/methodology/approach Data from all A-share Chinese companies listed on the Shanghai and Shenzhen stock exchanges for the period from 2010 to 2015 are used. To draw inferences from the data, ordinary least squares (OLS) regression and cluster OLS are used as a baseline methodology. To control for the possible issue of endogeneity, firm-fixed-effects regression, two-stage least squares regression and propensity score matching are used. Findings A reliable evidence is found that tournament incentives motivate CEOs to be more socially responsible. Additional analysis reveals that the positive effect of CEO tournament incentives on corporate social responsibility performance (CSRP) is more pronounced in state-owned firms than it is in non-state-owned firms. The study’s findings are consistent with tournament theory and the conventional wisdom hypothesis, which proposes that better incentives lead to competitiveness, which improves financial and social performance. Practical implications The study’s findings have implications for companies and regulators who wish to enhance CSRP by giving tournament incentives to top managers. Investment in social responsibility may reduce the conflict between executives and employees and improve the corporate culture. Originality/value This study contributes to the existing literature by providing the first evidence that CEOs’ tournament incentives play a vital role in CSRP. The study’s findings contribute to tournament theory.

CEO-employee pay gap and firm R&D efficiency

2020 ◽  
Vol 19 (2) ◽  
pp. 271-287
Author(s):  
H. Leon Chan ◽  
Brett Kawada ◽  
Taekjin Shin ◽  
Jeff Wang
Keyword(s):  
Fixed Effects ◽  
Chief Executive ◽  
Employee Motivation ◽  
Percentage Increase ◽  
Pay Equity ◽  
Pay Gap ◽  
Content Type ◽  
Main Independent Variable ◽  
Annual Total ◽  
The Impact

Purpose This study aims to examine whether the pay gap between the chief executive officer (CEO) and non-executive employees affects the firm’s research and development (R&D) efficiency. Design/methodology/approach The dependent variable is the firm’s R&D efficiency, defined as a percentage increase in revenue from a 1-per cent increase in R&D spending. The main independent variable is the CEO-employee pay gap, defined as the ratio of annual total compensation for the CEO to the average of non-executive employees of the firm. The authors estimate fixed-effects models to examine the association between R&D efficiency and the pay gap between CEO and non-executive employees. Findings Results indicate a negative and significant association between R&D efficiency and CEO-employee pay gap, which suggests that a wider pay gap reduces employee motivation and effort, consistent with pay equity theory. We also find that the CEO-employee pay gap negatively moderates the relationship between employee pay growth and R&D efficiency Research limitations/implications Recently enacted pay gap disclosure requirements mandated by the Dodd-Frank Act will make the disparity between CEO and non-executive compensation more salient. This study provides evidence of a firm outcome associated with that disparity. Originality/value This study is among the first to investigate the impact of the pay gap on R&D efficiency, a firm outcome not previously explored in the literature. This study also investigates CEO-employee pay gap’s role as a factor that moderates the effects of employee pay growth and institutional ownership on R&D efficiency

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