Changing the blame game: Does the presence of a pay ratio disclosure impact nonprofessional investors’ reactions to CEOs’ internal attributions for poor firm performance?

2021 ◽  
Author(s):  
Nicole L Cade ◽  
Steven E Kaplan ◽  
Serena Loftus
Keyword(s):  
Firm Performance ◽  
Unintended Consequences ◽  
Underlying Process ◽  
Nonprofessional Investors ◽  
Ceo Pay ◽  
Performance Results ◽  
The Impact

We conduct two experiments to investigate how the presence of the CEO pay ratio, a recently mandated disclosure, influences nonprofessional investors’ reactions to a CEO’s internal attributions for poor firm performance. Results of our first experiment suggest that relative to blaming oneself, blaming other firm employees for poor firm performance more effectively absolves a CEO from responsibility for poor firm performance and damages perceptions of the CEO’s trustworthiness less when a pay ratio disclosure is present versus absent. These perceptions, in turn, affect investors’ support for the CEO’s compensation and the company’s attractiveness as an investment. Our second experiment provides evidence of the underlying process, showing the pay ratio disclosure and the CEO’s attribution to other employees affects the perceived status of a CEO. Together, our findings inform managers about the impact of their attributions for poor firm performance and regulators about potential unintended consequences of pay ratio disclosures.

scholarly journals Two Sides of the Same Coin. University-Industry Collaboration and Open Innovation as Enhancers of Firm Performance

2021 ◽  
Vol 13 (7) ◽  
pp. 3866
Author(s):  
Joana Costa ◽  
Ana Rita Neves ◽  
João Reis
Keyword(s):  
Firm Performance ◽  
Open Innovation ◽  
Primary Data ◽  
Company Performance ◽  
Innovation Ecosystem ◽  
Industry Collaboration ◽  
And Performance ◽  
Performance Results ◽  
The Impact ◽  
University Industry

Open innovation is proved to be determinant in the rationalization of sustainable innovation ecosystems. Firms, universities, governments, user communities and the overall environment are called to contribute to this dynamic process. This study aims to contribute to a better understanding of the impact of open innovation on firms’ performance and to empirically assess whether university-industry collaborations are complementary or substitutes for this activity. Primary data were collected from a survey encompassing 908 firms, and then combined with performance indicators from SABI (Spanish and Portuguese business information). Econometric estimations were run to evaluate the role of open innovation and university-industry collaboration in the firm innovative propensity and performance. Results highlight the importance of diversity in collaborations with the academia and inbound open innovation strategy as enhancers of firm performance. The two activities reinforce each other. By testing the impact of open innovation practices on company performance, the need for heterogeneity in terms of contact type and university is also demonstrated. Findings cast light on the need to reformulate existing policy packages, reinforcing the ties with academia as well as the promotion of open innovation strategies. The connection to the innovation ecosystem needs to be further encouraged as well as the promotion of persistent connections with the knowledge sources in an open and multilateral framework.

scholarly journals CEO Compensation and Firm Performance: The Role of ESG Transparency

2020 ◽  
Vol 4 (2) ◽  
pp. 278
Author(s):  
Chetna Rath ◽  
Florentina Kurniasari ◽  
Malabika Deo
Keyword(s):  
Firm Performance ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Negative Relationship ◽  
Chief Executive ◽  
Long Run ◽  
Ceo Pay ◽  
Executive Officers ◽  
The Impact

Chief executive officers (CEOs) of environmental, social, and governance (ESG) firms are known to take lesser pay and engage themselves in corporate social responsibility activities to achieve the dual objective of the enhancement of firm’s performance as well as benefit for stakeholders in the long run. This study examines the role of ESG transparency in strengthening the impact of firm performance on total CEO pay in ESG firms. A panel of 67 firms for the period of 2014–2019 has been analyzed using the two-step system GMM model, with NSE Nifty 100 ESG Index as the data sample and ESG scores from Bloomberg database as a proxy for transparency. Findings reveal that environmental and governance disclosure scores have the potential to intensify the negative relationship between firm performance and CEO compensation, while social disclosure scores do not. In addition, various firm-specific, board-specific, and CEO-specific attributes have also been considered controls affecting remuneration. This paper contributes to the literature by exploring the effect of exhibiting ESG transparency and its nexus with CEO pay as well as firm performance.

The Impact of Publishing and Patenting Activities on New Product Development and Firm Performance: The Case of the US Pharmaceutical Industry

2003 ◽  
Vol 07 (02) ◽  
pp. 213-221 ◽  
Author(s):  
G. Steven McMillan ◽  
Alfredo Mauri ◽  
Robert D. Halmilton
Keyword(s):  
Firm Performance ◽  
Pharmaceutical Industry ◽  
Product Development ◽  
New Product Development ◽  
New Product ◽  
The Us ◽  
Managerial Implications ◽  
Performance Results ◽  
The Impact

This paper studies the role of publishing and patenting activities as predictors of new product development for a sample of companies in the U.S. pharmaceutical industry. The research also examines the relation between new product development and firm performance. Hypotheses are developed based on the well-established absorptive capacity literature. The results show that publishing scientific articles and stock of patents are both significant predictors of the number of new molecular entities (NMEs) for which a firm receives approval. In addition, the degree to which a firm builds on its own technology (measured as self-citations in its patents) also predicts NMEs, but the regression coefficient had an unexpected negative sign. Finally, the performance results confirm that the approval of NMEs is significantly associated with the market-to-book ratio of a firm. The managerial implications of these findings and study limitations are also discussed.

The Impact of Information Technology Internal Controls on Firm Performance

2012 ◽  
Vol 24 (2) ◽  
pp. 39-49 ◽  
Author(s):  
Lemuria D. Carter ◽  
Brandis Phillips ◽  
Porche Millington
Keyword(s):  
Information Technology ◽  
Firm Performance ◽  
Internal Control ◽  
Ordinary Least Squares ◽  
Internal Controls ◽  
Publicly Traded ◽  
Sarbanes Oxley ◽  
Internal Control Weaknesses ◽  
Performance Results ◽  
The Impact

Since the introduction of the Sarbanes-Oxley (SOX) Act in 2002, companies have begun to place more emphasis on information technology (IT) internal controls. IT internal controls are policies that provide assurance that technical systems operate as intended, provide reliable data, and comply with regulations. Research suggests that firms with strong internal controls perform better than those with internal control weaknesses. In this study, the authors evaluate the impact of IT internal controls on firm performance. The sample includes 72 publicly traded firms, 36 that reported IT internal control weaknesses and 36 that did not. The results of ordinary least squares (OLS) regression indicate that substantive IT internal control weaknesses negatively impact firm performance. Results and implications for research and practice are discussed.

scholarly journals Intellectual Capital, Political Uncertainty and Firm Performance: Evidence from Pakistan

2021 ◽  
Vol 7 (2) ◽  
Author(s):  
Farheen Hussain ◽  
Ayub Khan Mehar
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Intellectual Capital ◽  
Stock Exchange ◽  
Value Added ◽  
Secondary Data ◽  
Political Uncertainty ◽  
Negative Effect ◽  
Performance Results ◽  
The Impact

This research has examined the impact of Intellectual Capital (IC) on performance of the firms in Pakistan while considering political uncertainty as moderating variable. The research used secondary data of firms, related to manufacturing sectors, listed in Karachi Stock Exchange - KSE 100 Pakistan for a ten-year period of 2010-2019. Value Added Intellectual Coefficient (VAIC) model by Pulic (1998) has been used to calculate IC and its components and ROA is used to measure firm’s performance. Regression Model has been employed to investigate the hypothetical relationship between IC and firm performance. Results of this paper revealed that CEE and CCE have a positive relationship with the financial performance of firms in Pakistan whereas SCE has negative effect on the financial performance of the firms. Furthermore, the findings suggest political instability as a significant moderating variable on the relationship among intellectual capital, its components and firms’ performance. This research is the first attempt in investigating the relative importance of intellectual capital success of any firm under political uncertainty.

The determinants of CEO compensation: new insights from United States

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmed Bouteska ◽  
Salma Mefteh-Wali
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Future Research ◽  
Ceo Power ◽  
Content Type ◽  
Managerial Power ◽  
The Us ◽  
Ceo Pay ◽  
The Impact

PurposeThe purpose of this paper is to examine the determinants of CEO compensation for sample of the US firms. It emphasizes the presence of executive compensation persistence and the importance of CEO power besides performance while setting CEO pay.Design/methodology/approachThe empirical analysis is conducted on a large sample of US firms during the period 2006–2016. It is based on the generalized method of moments (GMM) models to assess the impact of numerous factors on CEO compensation.FindingsThe main findings reveal that firm performance proxied by accounting-based proxies, as well as market-based proxies, plays a significant role in explaining variations in levels of executive compensation. Moreover, there is a significant persistence in executive compensation among the US sample firms. The authors also document that poor governance conditions (managerial power hypothesis) lead to high compensation levels offered to CEO.Research limitations/implicationsAt the end, without a doubt, the analysis has some limitations that prompt the authors to consider future research directions. One future research avenue that can help better explain the effect of firm performance on the CEO compensation is to study this issue using an international sample to determine whether country-level characteristics (e.g. creditor rights, shareholder rights and the enforcement climate) can influence this relationship. Furthermore, it can be worthwhile to deepen the analysis of CEO power and its impact on CEO compensation. It will be interesting to emphasize how the CEO power interacts with the other governance characteristics and some CEO attributes as CEO gender.Practical implicationsThe paper's findings have implications for practitioners, policymakers and regulatory authorities. First, the findings inform regulators that performance is not the only determinant of CEO pay level. This may warrant increased firm disclosure of the details of the pay structure. Second, the study offers insights to policymakers and members of boards of directors interested in enhancing the design of executive compensation and internal corporate governance, to better align managerial incentives to shareholder interests. Firms should strengthen the board independence and properly constitute the board committees (compensation, risk, nomination…).Originality/valueThis paper presents a comprehensive overview of the CEO compensation determinants. It supplements the classic pay-for-performance sensitivity predictions with insights gained from the dynamics of wage setting theory and managerial power theory. The authors develop a composite index to measure the CEO power in order to test the impact of CEO attributes on CEO pay. Additionally, it verifies whether the determinants of CEO pay depend on firm age and size.

The Impact of Vivid Graphical Presentation of Financial Information in Digital Annual Reports on Investors' Impressions of Management and Firm Performance

2019 ◽  
Vol 34 (3) ◽  
pp. 233-253
Author(s):  
James (Yibo) Zhang
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Behavioral Outcomes ◽  
Amazon Mechanical Turk ◽  
Annual Reports ◽  
Nonprofessional Investors ◽  
Strategic Disclosure ◽  
High Degree ◽  
The Impact ◽  
Graphical Presentation

ABSTRACT This study examines the effect of graphical vividness on nonprofessional investors' impressions of management and firm performance when the financial performance news is either positive or negative. Conducting a 2 × 2 between-participants experiment with 470 participants from Amazon Mechanical Turk (M-Turk), I find that when the news is positive, nonprofessional investors have more positive impressions of management, which, in turn, leads to more positive impressions of firm performance when the graphical presentation is vivid versus pallid. In contrast, when the news is negative, presenting graphs vividly has little effect on nonprofessional investors' impressions. The study contributes to regulators and practice by demonstrating that allowing a high degree of presentation flexibility in digital annual reports has behavioral outcomes to nonprofessional investors' judgments and decisions. The study also contributes to the strategic disclosure literature by demonstrating the impact of graphical vividness in presenting financial performance information.

scholarly journals Macro-Structural Obstacles to Firm Performance

2020 ◽  
Vol 20 (62) ◽  
Author(s):  
Amr Hosny
Keyword(s):  
Firm Performance ◽  
Capacity Utilization ◽  
Estimation Methods ◽  
Export Diversification ◽  
Access To Finance ◽  
Percentage Points ◽  
Diversified Firms ◽  
Performance Results ◽  
World Bank Enterprise Survey ◽  
The Impact

A recent World Bank enterprise survey identified access to finance as the top constraint to Doing Business in Nigeria. In this context, the objective of this paper is two-fold: (i) study firm characteristics associated with more access to finance and export diversification; and (ii) quantify the impact of these structural obstacles on firm performance. Results suggest that (i) larger and export-oriented firms are about 40 percentage points less likely to report access to finance as a business obstacle, while firms perceiving access to finance as a constraint are, on average, about 10-40 percentage points less likely to be export-oriented diversified firms; and (ii) better access to finance and export diversification can help firm employment —as much as 80 percent higher— and capacity utilization. Results are largely robust to different specifications and estimation methods.

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