Chief executive officers

In Essay 1, I investigate the association between CEOs’ social capital and stock price informativeness in a sample of US firms. After accounting for the fact that larger networks attract more analysts following, I find that firms with larger CEO social capital exhibit higher private information incorporation and hence more informative stock prices. Results are consistent for five different proxies for stock price informativeness. Furthermore, the positive association between social capital and informativeness is driven by more diverse networks, as measured by gender, nationality, education, or professional diversity. Overall, results suggest that private information existing in networks may result in markets that are more informationally efficient.
In Essay 2, I show that CEOs’ social capital has a positive impact on stock price informativeness in an international sample. Different robustness and endogeneity tests confirm those results. Moreover, I find that factors present at the country level can mitigate or reinforce social capital’s impact on informativeness. I consider characteristics not observable within one country that can influence such relation around the world including legal, cultural, and developmental. I uncover that for more developed countries and those with a higher quality of institutions a positive impact of social connectedness is more pronounced. In addition, I show the importance of CEOs’ connections characteristics for their impact on stock price informativeness. I find that if CEOs’ connections come from developed countries or countries that have better formal and informal institutions which affect information transparency, CEOs’ social capital becomes more important for informativeness.

The proposed study examines the effect of CEO-board social connections on corporate policies. Motivated by the independent board view and collaborative board view, I propose two opposing hypotheses explaining the effect of CEO-board connections on corporate policies: monitoring hypothesis and advising hypothesis.
In my first essay, I validate the two competing hypotheses of CEO-board connections by investigating the effect of CEO-board connections on monitoring and advising role of the board, and firm valuation. I find that CEO-board connections have a negative effect on board monitoring and positive effect on board advising and firm valuation. The results are robust to endogeneity concerns and different model specifications. Disentangling the Channels, I also show that the predicted effect of CEO-board connections on board monitoring and advising have opposite effects on firm valuation. Lastly, I provide evidence that the effect of CEO-board connections on firm performance is stronger in firms with high growth opportunities.

In essay 1, I investigate the association of place attachment and financial reporting quality. Management characteristics affect a wide range of corporate decisions, including decisions affecting financial reporting quality; however, the influence of managerial place attachment on corporate decision-making has received relatively little attention - even though place attachment is thought to play a significant role in forming individual identity. Place attachment affects the decisions that individuals make with regards to social and environmental policies, lifestyle, and, in the corporate context, firmlevel policies. Because firms hire local CEOs and CFOs five to eight times more often than expected if geography were irrelevant to the matching process, the question of how managerial place attachment affects financial reporting outcomes is an important one. I investigate the effect of managerial place attachment on financial reporting quality in a sample of publicly traded U.S. firms. My findings indicate that firms with place attached CEOs display higher financial reporting quality, indicating a significant caretaking bond between CEO and stakeholders. CFOs, on the other hand, are marginally associated with lower financial reporting quality, indicating that they are more likely than CEOs to extract personal gain when they are local to their firm headquarters.

Increasing evidence suggests the personal traits of chief executive officers (CEOs) can influence corporate policies. We examine how one dimension, past professional experiences, can affect corporate payout policy. Exploiting exogenous CEO turnovers and future employment, we hypothesize that CEOs experiencing a distress event in their past career alter the corporate payout policy at their subsequent firm of employment. We discover that CEOs having experienced prior professional career distress are less likely to pay dividends and use repurchases and pay out lower levels for each type of payout. Additionally, when CEOs with distress do have a payout policy greater than zero dollars, there exists a preference toward the use of repurchases in the payout policy, adding to the literature of substitution and differences between the two forms of payout. We find that dividend smoothing is reduced by CEOs that have past professional distress.

The impact of executive cognitive bases and values on corporate strategic change was examined in a longitudinal study of the computer hardware industry. Corporate strategic change was separated into pattern and magnitude dimensions as suggested by Ginsberg (1988). These dimensions complement the logic of Tushman and Romanelli (1985) who suggest that organizations proceed through long periods of stability or adjustment, punctuated by periods of metamorphic change or reorientation. I proposed that executive cognitive bases and values would be associated with strategic reorientation but not strategic adjustment since executive perceptions and responses are the internal driving forces that direct and redirect organizations (Romanelli & Tushman, 1988). Panel data analysis techniques were used to test the hypotheses developed in this study. Corporate strategic reorientation and adjustment were operationalized by changes in unrelated and related diversification, and changes in between-stage and within-stage vertical integration, respectively. The mean organization tenure and functional background heterogeneity of top management teams were used as proxies for executive cognitive bases and values. Results provided overall support for the hypotheses. Mean organization tenure was negatively related to unrelated diversification change, while neither mean organization tenure nor functional background heterogeneity were associated with related diversification change. Functional background heterogeneity was positively related to between-stage vertical integration change, however, contrary to expectations, it was negatively related to within-stage vertical integration change. These findings confirm and extend the literature which relates managerial characteristics to strategic change.

This dissertation investigates the antecedents and consequences to pay disparity between the CEO and non-CEO executives from an equity-based perspective. While the principles of agency theory suggest that CEOs are granted higher compensation packages to better align their motives to those of the firm's shareholders, empirical research has not supported a positive relationship between rising CEO pay and firm performance. Some results even suggest a negative relationship. This dissertation argues that if organizational outcomes are determined by the integrated skills and talents of its dominant coalition, and if the management of a firm's trajectory is a shared process, then, the disparity in rewards between the CEO and those that work closest to him becomes an important area of study.