The role of CEO relative standing in acquisition behavior and CEO pay

Abstract

REFERENCESeo J, Gamache DL, Devers CE, Carpenter MA. 2015. The role of CEO relative standing in acquisition behavior and CEO pay.

The copycat CMO: firms’ imitative behavior as an explanation for CMO presence

“…Market uncertainty We calculated market uncertainty using the volatility of the industry's sales growth (based on 2-digit SIC codes) by regressing sales over a five-year period ending in the focal year and using the standard error of the regression divided by the mean value of industry sales for the five-year period (Seo et al 2015).…”

The Pre-Deal Phase of Mergers and Acquisitions: A Review and Research Agenda

“…Shedding light on the role of entrenchment and self-serving behaviors, the research shows that CEOs are also more likely to initiate M&A if their peers win CEO awards (Shi, Zhang, & Hoskisson, 2017) or if they are compensated less than their peers (Seo, Gamache, Devers, & Carpenter, 2015). Similarly, CEOs have been found to engage more actively in M&A when they are compensated in stock options (Lewellen, Loderer, & Rosenfeld, 1985; Sanders, 2001) or have high relative power vis-à-vis the board (Grinstein & Hribar, 2004).…”

Managerial Risk Taking

“…Social comparison is particularly relevant for explaining group-level influence on risk behavior. As TMT members may routinely compare themselves with each other because they observe similarities in their demographic characteristics, abilities, or positions (Festinger, 1954), such propensity may also be based on pay (Fredrickson, Davis-Blake, & Sanders, 2010;Seo, Gamache, Devers, & Carpenter, 2014), causal attribution by other organizational actors and public media (Hayward, Rindova, & Pollock, 2004;Meindl, Ehrlich, & Dukerich, 1985), or status (Locke, 2003). Given the empirical evidence that an individual's negative feelings of envy or inequality can result in unnecessary risk taking to reduce the perceived gap between the actor and the target(s) (Flynn, 2003;Smith & Kim, 2007), individual-level effects on risk taking may be more pronounced when TMT members engage in social comparison.…”

“…For example, acquisitions and divestitures, depending on whether they are related or unrelated to the firm, could be viewed from AT as reducing the manager's risk exposure (Amihud, & Lev, 1981;Baysinger & Hoskisson, 1990). In particular, some studies have shown that CEOs benefit from an acquisition regardless of the actual performance of the acquisition (Bliss & Rosen, 2001;Harford & Li, 2007) and appear to use acquisitions to increase their compensation (Seo et al, 2014). However, acquisitions and divestitures have often been applied as measures of increased risk taking in works adopting theories such as the BTOF, PT or the BAM (e.g., Iyer & Miller, 2008;Larraza-Kintana et al, 2007;Matta & Beamish, 2008;Park, 2003).…”

“…Some work has been directed at the outcomes of risk taking (see Figure 1). For instance, some scholars have found that risk taking affects individual outcomes such as managers' subsequent changes in pay and long-term pay (Seo et al, 2014), satisfaction with firm performance , the CEO vega (i.e., CEO wealth associated with stock options) and the CEO's future risk taking (Coles et al, 2006). Other studies have shown how it affects firm outcomes (see Andersen et al, 2007;Bromiley et al, 2001;Nickel & Rodriguez, 2002;Ruefli, Collins & LaCugna, 1999)--principally firm performance (e.g., Bromiley, 1991;Strandholm et al, 2004;Villena et al, 2009) but also corporate restructuring and diversification (Hoskisson, Hitt, & Hill, 1991), firm recovery (Morrow et al, 2007), learning (Sitkin, See, Miller, Lawless, & Carton, 2011), survival/failure Latham & Braun, 2009), structure (environment-scanning, technocratization, differentiation : Miller et al, 1982), internationalization (Reuber & Fischer, 1997), product introduction divestiture (Hoskisson et al, 1994;Pathak et al, 2014), and BOD oversight of earning statements (Laux & Laux, 2009).…”