The impact of earnings expectations on corporate downsizing

Schulz, Ann‐Christine; Wiersema, Margarethe F.

doi:10.1002/smj.2925

Cited by 34 publications

(30 citation statements)

References 53 publications

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“…Some of the literature supports the idea that earnings pressure stimulates myopic behavior in executives, such as earnings management [24], and increases the current earnings at the expense of future earnings [17]. These executives attempt to weaken earnings pressure by cutting strategic investments [27,28] and corporate downsizing [29]. Duong and Pescetto [30] also show that earning management driven by earnings pressure may be implemented to maintain high duration valuations of the market.…”

Section: The Executive Incentives and Csr Strategy When Considering Ementioning

confidence: 96%

“…Moreover, ownership structure shows a significant impact on the response of executives. Schulz and Wiersema [29] show that institutional investor stock ownership weakens executives' sensitivity under market pressure. Generally, the earnings pressure plays an essential role in investigating the impact of executive incentives on CSR strategy.…”

Section: The Executive Incentives and Csr Strategy When Considering Ementioning

confidence: 99%

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Executive Incentives Matter for Corporate Social Responsibility under Earnings Pressure and Institutional Investors Supervision

2020

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This paper theoretically explores the impact of the incentive preferences of executives (i.e., short-term incentives and long-term incentives) on corporate social responsibility (CSR) decisions (i.e., institutional CSR and technical CSR). Further, the paper presents the mechanism through which executives influence CSR activities by the pressures from financial analysts and institutional investors supervision. Using a large sample of China-listed firms over 2007–2017, we achieve some helpful empirical results. The executives with short-term incentives tend to implement technical CSR strategy, while those with long-term incentives tend to implement institutional CSR strategy. Executives with short-term incentives, compared with those with long-term incentives, show stronger inter-temporal tradeoffs behaviors in the earnings pressure context. Furthermore, dedicated institutional investors can effectively attenuate the hypocritical behaviors of executives, and the effectiveness of governance shows a positive relationship with investors’ horizon. Our findings enrich the understanding on the relationship between the executives and CSR decisions in the earnings pressure context and further helps to perfect the institutional design in China’s listed companies.

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Section: The Executive Incentives and Csr Strategy When Considering Ementioning

confidence: 96%

Section: The Executive Incentives and Csr Strategy When Considering Ementioning

confidence: 99%

Executive Incentives Matter for Corporate Social Responsibility under Earnings Pressure and Institutional Investors Supervision

2020

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“…Analysts are powerful intermediaries who indirectly influence organizational strategies (Brauer & Wiersema, 2018; Wiersema & Zhang, 2011). We contend that corporate managers are particularly attuned to analysts' assessments of their firms' prospective performance, as analysts' earnings per share (EPS) growth projections can profoundly influence corporate managers' “search and decision processes” (Schulz & Wiersema, 2018, p. 2691), since managers have a “near‐obsession” with this type of assessment (Graham, Harvey, & Rajgopal, 2005, p. 21).…”

Section: Introductionmentioning

confidence: 99%

“…Finally, we contribute to the broader BToF literature by building on recent scholarship that conceptualizes firm performance relative to expectations in terms of future prospects (Schulz & Wiersema, 2018). Traditionally, BToF research contextualizes its theoretical tenets within the confines of present and past performance (Argote & Greve, 2007; Arrfelt et al, 2013).…”

Section: Introductionmentioning

confidence: 99%

“…Traditionally, BToF research contextualizes its theoretical tenets within the confines of present and past performance (Argote & Greve, 2007; Arrfelt et al, 2013). Schulz and Wiersema (2018) depart from this perspective, though, arguing that managers increasingly favor future performance prospects over past performance information. We expound on this notion by examining how analysts' EPS growth estimates influence current strategizing (i.e., internal capital allocation), which has long‐reaching implications for the structure and direction of the multidivisional firm.…”

Section: Introductionmentioning

confidence: 99%

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Corporate‐level influences on internal capital allocation: The role of financial analyst performance projections

Busenbark

Semadeni

Arrfelt

et al. 2021

Strategic Management Journal

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Research contends that internal capital should be allocated in proportion to divisional performance, but scholars are often puzzled to find that managers do not adhere to this winner‐picking approach. We argue this is because scholarship has not incorporated corporate‐level factors that influence how corporate managers structure holistic capital allocation strategies. In this study, we build on the behavioral theory of the firm to focus on analyst performance projections for multidivisional corporations and how they inform corporate managers' allocation strategies. Specifically, we theorize corporate managers deviate from the winner‐picking allocation approach owing to search‐related behaviors stemming from projected performance below or above expectations. We further theorize about conditions that offer corporate managers opportunities to deviate from winner‐picking, focusing particularly on multidivisional relatedness and asset durability.

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The impact of a compressed workweek on shareholder value: An event study analysis of Belgium's 4‐day workweek legislation

Dutordoir,

Struyfs

2024

Human Resource Management

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While the compressed workweek (CWW) has gained traction in recent years, its impact on firms' financial performance is not well understood. This study addresses this gap in the literature by examining the effect of the CWW on shareholder value. Drawing on social exchange theory and its norm of reciprocity, we introduce a conceptual model on the main effect of the CWW on shareholder value, and the moderating roles of the anticipated type and degree of employee reciprocation. To test the model's predictions, we exploit the announcement of Belgium's mandatory adoption of a CWW in February 2022 as the setting for a policy event study analysis. We find positive average stock price reactions of Belgian listed firms to the CWW's announcement, consistent with investors expecting the CWW to result in favorable employee reciprocation. Stock price reactions are more positive for firms with a lower ex ante employee productivity, suggesting employees are predicted to reciprocate with higher efforts. Stock price reactions are also more positive for firms with a higher reliance on knowledge workers, consistent with these employees deriving a greater utility from flexible working arrangements. Robustness tests, including a placebo analysis and an event study of international firms with Belgian subsidiaries, corroborate our results. Our study offers several theoretical contributions and has practical implications for HR managers and policymakers.

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The impact of earnings expectations on corporate downsizing

Cited by 34 publications

References 53 publications

Executive Incentives Matter for Corporate Social Responsibility under Earnings Pressure and Institutional Investors Supervision

Executive Incentives Matter for Corporate Social Responsibility under Earnings Pressure and Institutional Investors Supervision

Corporate‐level influences on internal capital allocation: The role of financial analyst performance projections

The impact of a compressed workweek on shareholder value: An event study analysis of Belgium's 4‐day workweek legislation

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