Buying bad behavior: Tournament incentives and securities class action lawsuits

Shi, Wei; Connelly, Brian L.; Sanders, Wm. Gerard

doi:10.1002/smj.2400

Cited by 128 publications

(94 citation statements)

References 161 publications

(290 reference statements)

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“…We measured pay gap as the difference between the CEO's total compensation and the average total compensation of the TMT's four highest‐paid members other than the CEO (Henderson and Fredrickson, ; Shi, Connelly, and Sanders, in press). Because CEO‐TMT pay gap is not normally distributed, we monotonically transformed it by taking the natural logarithm of the difference, plus a constant that made all observations positive (Shi, Connelly, and Sanders, ). We centered all independent variables before adding them into our models.…”

Section: Methodsmentioning

confidence: 99%

“…For example, we can envision important boundary conditions to our findings. Tournament theory offers its greatest explanatory power when tournament participants (i.e., top managers) compete relatively independent of one another (Shi et al, 2016). When managers coordinate or are dependent on one another for success, it reduces competition among them (Main, O'Reilly, and Wade, 1993).…”

Section: Antecedents To Competitive Repertoire Complexitymentioning

confidence: 99%

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Competitive repertoire complexity: Governance antecedents and performance outcomes

et al. 2016

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Research summary: Past inquiry has found that implementing complex competitive repertoires (i.e., diverse and dynamic arrays of actions) is challenging, but firms benefit from doing so. Our examination of the antecedents and outcomes of complex competitive repertoires develops a more nuanced perspective. Data from 1,168 firms in 204 industries reveal that complexity initially harms performance, but then becomes a positive factor, except at high levels. We use agency and tournament theories, respectively, to examine how key governance mechanisms—ownership structure and executive compensation—help shape firms' competitive repertoires. We find that the principals of agency theory and the pay gap of tournament theory are both important antecedents of competitive complexity, and an interaction exists wherein firms build especially complex repertoires when both influences are strong. Managerial summary: In boxing, the fight does not always go to the bigger or stronger person, or even to whomever throws the most punches—the fight is sometimes won by the boxer who is unpredictable, such as throwing an uppercut when the opponent expected a right hook. Similarly, when companies compete in the marketplace, advantage is afforded not only to those with more resources or who engage in more competitive activity, but also to those whose actions are unpredictable. In this study, we develop the notion of “competitive complexity,” which describes the diversity and changing nature of a company's competitive moves. Implementing complex competitive repertoires can be painful in the short term but, if done correctly, can help company performance in the long run. Copyright © 2016 John Wiley & Sons, Ltd.

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Section: Methodsmentioning

confidence: 99%

Section: Antecedents To Competitive Repertoire Complexitymentioning

confidence: 99%

Competitive repertoire complexity: Governance antecedents and performance outcomes

et al. 2016

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“…Another important trigger of corporate misconduct is executive compensation. A large body of research suggests that top executives are often incentivized to commit misconduct to inflate the stock price as a way to boost their compensation (Harris & Bromiley, 2007;Shi, Connelly, & Sanders, 2016). In particular, option pay has been consistently found to be associated with corporate misconduct (Burns & Kedia, 2006;Harris & Bromiley, 2007;Zhang, Bartol, Smith, Pfarrer, & Khanin, 2008).…”

Section: Securities Fraudmentioning

confidence: 99%

State ownership and securities fraud: A political governance perspective

Shi

Aguilera

Wang

2020

Corporate Governance

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Research question/issue This study attempts to shed new light on how the state as a controlling shareholder can affect the interests of minority shareholders by investigating the role of state ownership in deterring securities fraud commission. Research findings/insights Using archival data from a large sample of Chinese publicly traded firms, we uncover that state ownership is negatively associated with the likelihood of securities fraud commission. Further, CEO political background reinforces this negative relationship. We also uncover that firms with high state ownership are more likely to dismiss CEOs than those with low or no state ownership upon securities fraud detection. Theoretical/academic implications Departing from agency theory‐centric research on state ownership and corporate governance, this study introduces a political governance perspective to unpack the role of state ownership in corporate governance. Political governance refers to organizational control mechanisms deployed by political actors to achieve their objectives. Practitioner/policy implications Studying how political governance systems influence managerial behaviors is critical to gaining a complete insight into the implications of state ownership on corporate governance.

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“…Environmental uncertainty includes any ambiguity in the operating environment (Karjalainen and Moxham 2013;Montiel et al 2016) with respect to host government policies, procedures and practices which creates unpredictability for managers (Miller 1992). Information uncertainty is a type of environmental uncertainty that arises when managers' limited ability to collect and process information about the external environment (Grewatsch and Kleindienst 2017) makes it difficult for them to predict the outcomes of their decisions (Shi et al 2015). When environmental uncertainty is more pronounced, firms experience greater knowledge-based risk which may impede their ongoing ability to navigate within foreign host market environments (Milliken 1987).…”

Section: Transaction Cost Theorymentioning

confidence: 99%

Private Sector Corruption, Public Sector Corruption and the Organizational Structure of Foreign Subsidiaries

Sartor

Beamish

2019

J Bus Ethics

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Corporate anti-corruption initiatives can make a substantial contribution towards curtailing corruption and advancing efforts to achieve the United Nations' Sustainable Development Goals. However, researchers have observed that underdeveloped assumptions with respect to the conceptualization of corruption and how firms respond to corruption risk impeding the efficacy of anti-corruption programs. We investigate the relationship between the perceived level of corruption in foreign host countries and the organizational structure of subsidiary operations established by multinational corporations (MNCs). Foreign host market corruption is disaggregated into two components-private and public corruption. We employ an uncertaintybased perspective grounded in transaction cost theory to focus upon the distinct mechanisms through which private and public corruption can each be expected to impact a foreign subsidiary's organizational structure [wholly-owned subsidiary (WOS) or a joint venture (JV) with a local partner]. We expect that each type of corruption fosters a different type of uncertainty (environmental or behavioral) which predominates in shaping the MNC's choice of foreign subsidiary investment structure. Hypotheses are developed and tested with a sample of 187 entries into 19 foreign host markets. Each type of corruption was found to exert a distinct effect upon the organizational structure of foreign subsidiaries. More precisely, while heightened perceived levels of public corruption were found to motivate MNCs to invest through a JV with a local partner rather than a WOS, more pronounced private corruption precipitated the opposite outcome.

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Buying bad behavior: Tournament incentives and securities class action lawsuits

Cited by 128 publications

References 161 publications

Competitive repertoire complexity: Governance antecedents and performance outcomes

Competitive repertoire complexity: Governance antecedents and performance outcomes

State ownership and securities fraud: A political governance perspective

Private Sector Corruption, Public Sector Corruption and the Organizational Structure of Foreign Subsidiaries

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