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Table of Contents

CEO Sensation Seeking and Corporate Innovation

Jayanthi Sunder, University of Arizona - Eller College of Management
Shyam V. Sunder, University of Arizona - Department of Accounting
Jingjing Zhang, McGill University - Desautels Faculty of Management

CEO Narcissism and Corporate Tax Policies

Kari Joseph Olsen, University of Southern California - Marshall School of Business
James Stekelberg, University of Arizona - Department of Accounting

Executive Confidence and New CEO Selection

Suman Banerjee, Nanyang Business School
Lili Dai, Australian National University (ANU)
Mark Humphery-Jenner, UNSW Australia - UNSW Business School, Financial Research Network (FIRN)
Vikram K. Nanda, Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Cognitive Frames in Corporate Sustainability: Managerial Sensemaking with Paradoxical and Business Case Frames

Tobias Hahn, KEDGE Business School
Lutz Preuss, University of London - Royal Holloway College
Jonatan Pinkse, Grenoble Ecole de Management
Frank Figge, KEDGE Business School

'What Good is Wall Street?' Institutional Contradiction and the Diffusion of the Stigma over the Finance Industry

Thomas J. Roulet, University of Oxford - Novak Druce Centre

Making the Same Mistake All Over Again: CEO Overconfidence and Corporate Resistance to Corrective Feedback

Guoli Chen, INSEAD - Singapore
Craig Crossland, McCombs School of Business
Shuqing Luo, National University of Singapore (NUS)


CORPORATE GOVERNANCE & SOCIOLOGY OR PSYCHOLOGY eJOURNAL
Sponsored by IRRC Institute

"CEO Sensation Seeking and Corporate Innovation" Free Download

JAYANTHI SUNDER, University of Arizona - Eller College of Management
Email:
SHYAM V. SUNDER, University of Arizona - Department of Accounting
Email:
JINGJING ZHANG, McGill University - Desautels Faculty of Management
Email:

We examine the role of managerial behavioral attributes in corporate innovation, focusing on sensation seeking. Innovation requires risk taking and a desire for new experiences, attributes captured by sensation seeking behavior. We identify sensation seeking CEOs based on their revealed preference of flying small aircraft in their personal life. Our evidence shows that sensation seeking CEOs are more successful at innovation and more effective with innovation spending, controlling for CEO overconfidence, pure risk-taking, general managerial ability, or an endogenous matching of CEOs to firms. Additionally, governance structures that involve low direct monitoring allow such CEOs to be effective.

"CEO Narcissism and Corporate Tax Policies" Free Download

KARI JOSEPH OLSEN, University of Southern California - Marshall School of Business
Email:
JAMES STEKELBERG, University of Arizona - Department of Accounting
Email:

We examine the effect of CEO narcissism on corporate tax policies. Narcissism is a multifaceted personality trait associated with a propensity to cheat and engage in questionable behavior. Narcissists feel that they are above the law and are aggressive in pursuing what they believe is theirs. Narcissists also take more risks than do others and possess heightened sensitivities to the rewards of risk taking. Consistent with these predictions regarding the behavioral tendencies of narcissistic individuals, we document a positive association between CEO narcissism and various measures of corporate tax avoidance and tax risk. Our study contributes to the literature by documenting a setting in which the individual personality characteristics of the CEO can impact firm-level tax policies.

"Executive Confidence and New CEO Selection" Free Download

SUMAN BANERJEE, Nanyang Business School
Email:
LILI DAI, Australian National University (ANU)
Email:
MARK HUMPHERY-JENNER, UNSW Australia - UNSW Business School, Financial Research Network (FIRN)
Email:
VIKRAM K. NANDA, Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick
Email:

Does a senior-executive's confidence-level affect the likelihood of being promoted to CEO? Prior literature suggests CEOs tend to be overconfident and that, in certain situations, overconfidence can enhance firm-performance. Using an option-based overconfidence-measure, we show overconfident-senior-executives are more likely to be promoted. Firms that are candidates for a change in strategy (i.e., mature, low-risk firms) tend to appoint overconfident-executives and benefit in terms of improved corporate value and innovative efficiency. Promotion of overconfident-executives (insignificantly) reduces value, however, when firms are less mature and riskier. Busy boards, and boards that target growth through acquisitions, tend to promote overconfident-executives as well, though significant value-effects are absent.

"Cognitive Frames in Corporate Sustainability: Managerial Sensemaking with Paradoxical and Business Case Frames" 
Academy of Management Review, 39(4), doi: 10.5465/amr.2012.0341, Forthcoming

TOBIAS HAHN, KEDGE Business School
Email:
LUTZ PREUSS, University of London - Royal Holloway College
Email:
JONATAN PINKSE, Grenoble Ecole de Management
Email:
FRANK FIGGE, KEDGE Business School
Email:

Corporate sustainability confronts managers with complex issues and tensions between economic, environmental and social aspects. Drawing on the literature on managerial cognition, corporate sustainability, and strategic paradoxes, we develop a cognitive framing perspective on corporate sustainability. We propose two cognitive frames – a business case frame and a paradoxical frame – and explore how differences between them in cognitive content and structure influence the three stages of the sensemaking process, i.e. managerial scanning, interpreting and responding with regard to sustainability issues. We explain how the two frames lead to differences in the breadth and depth of scanning, to differences in issue interpretations in terms of sense of control and issue valence, as well as to different types of responses that managers consider with regard to sustainability issues. By considering alternative cognitive frames, our argument contributes to a better understanding of managerial decision-making regarding ambiguous sustainability issues and develops the underlying cognitive determinants of the stance that managers adopt on sustainability issues. This argument offers a cognitive explanation why managers rarely push for radical change when faced with complex and ambiguous issues, such as sustainability, that are characterized by conflicting yet interrelated aspects.

"'What Good is Wall Street?' Institutional Contradiction and the Diffusion of the Stigma over the Finance Industry" Free Download
Journal of Business Ethics, Forthcoming

THOMAS J. ROULET, University of Oxford - Novak Druce Centre
Email:

The concept of organizational stigma has received significant attention in recent years. The theoretical literature suggests that for a stigma to emerge over a category of organizations, a “critical mass? of actors sharing the same beliefs should be reached. Scholars have yet to empirically examine the techniques used to diffuse this negative judgment. This study is aimed at bridging this gap by investigating Goffman’s notion of “stigma-theory?: how do stigmatizing actors rationalize and emotionalize their beliefs to convince their audience? We answer this question by studying the stigma over the finance industry since 2007. After the subprime crisis, a succession of events put the industry under greater scrutiny, and the behaviors and values observed within this field began to be publicly questioned. As an empirical strategy, we collected opinion articles and editorials that specifically targeted the finance industry. Building on rhetorical analysis and other mixed methods of media content analysis, we explain how the stigmatizing rhetoric targets the origins of deviant organizational behaviors in the finance industry, that is, the shareholder-value maximization logic. We bridge the gap between rhetorical strategies applied to discredit organizations and ones used to delegitimize institutional logics by drawing a parallel between these two literatures. Taking an abductive approach, we argue that institutional contradiction between field and societal-level logics is sufficient but not necessary to generate organizational stigma.

"Making the Same Mistake All Over Again: CEO Overconfidence and Corporate Resistance to Corrective Feedback" Free Download
Strategic Management Journal, Forthcoming

GUOLI CHEN, INSEAD - Singapore
Email:
CRAIG CROSSLAND, McCombs School of Business
Email:
SHUQING LUO, National University of Singapore (NUS)
Email:

Firms often make mistakes, from simple manufacturing overruns all the way to catastrophic blunders. However, there is considerable heterogeneity in the nature of corporate responses when faced with evidence that an error has taken place, and, therefore, in the likelihood that such errors will reoccur in the future. In this paper, we explore an important but understudied influence on firms’ responses to corrective feedback – a CEO’s level of overconfidence. Using multiple distinct measures of overconfidence and the empirical context of voluntary corporate earnings forecasts, we find strong, robust evidence that firms led by overconfident CEOs are less responsive to corrective feedback in improving management forecast accuracy. We further show that this relationship is moderated by prior forecast error valence, time horizon, and managerial discretion.

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About this eJournal

Sponsored by: IRRC Institute

This eJournal distributes working and accepted paper abstracts that deal with all aspects of governance related to sociology and psychology. The journal welcomes research with a focus on using tools and methods from the fields of sociology and psychology to study corporate governance. Topics of interest include, but are not limited to, how corporate governance arrangements are shaped by or shape social norms, psychological inclinations, and cognitive perceptions.

Authors submitting their work to the CGN network should submit it to no more than two CGN eJournals. In particular, they should submit it to no more than one "methodological" CGN eJournal (CG & Accounting; CG & Economics; CG & Finance; CG & Law; CG & Management; CG & Sociology or Psychology; CG Educator; CG Practice Series), and should submit it to no more than one of the "sub-field" journals (Acquisitions, Mergers, Contests for Control, & Activism; Actors & Players; Arrangements & Laws; Bankruptcy, Financial Distress, & Reorganization; Capital Raising, Investments, Distributions, & Market Trading; Comparative; Compensation of Executives & Directors; Economic Consequences, History, Development, & Methodology; Disclosure, Internal Control, & Risk-Management; Governance, Organization, & Processes; Governance of Special Types of Firms; International/Non-US; or Social Responsibility & Social Impact).

Editor: Lucian A. Bebchuk, Harvard University

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Directors

CGN SUBJECT MATTER EJOURNALS

LUCIAN A. BEBCHUK
Harvard Law School, National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
Email: bebchuk@law.harvard.edu

Please contact us at the above addresses with your comments, questions or suggestions for CGN-Sub.

Advisory Board

Corporate Governance & Sociology or Psychology eJournal

PATRICK BOLTON
Barbara and David Zalaznick Professor of Business, Columbia Business School - Department of Economics, Fellow, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

BRIAN R. CHEFFINS
S.J. Berwin Professor of Corporate Law, University of Cambridge - Faculty of Law, Fellow, European Corporate Governance Institute (ECGI)

JOHN C. COFFEE
Adolf A. Berle Professor of Law and Director of the Center on Corporate Governance, Columbia Law School, Fellow, European Corporate Governance Institute (ECGI), Fellow, American Academy of Arts & Sciences

JULIAN R. FRANKS
Professor of Finance, London Business School, Fellow, Centre for Economic Policy Research (CEPR), Fellow, European Corporate Governance Institute (ECGI)

HENRY HANSMANN
Augustus E. Lines Professor of Law, Yale Law School, Fellow, European Corporate Governance Institute (ECGI)

OLIVER D. HART
Andrew E. Furer Professor of Economics, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)

BENGT R. HOLMSTRÖM
Paul A. Samuelson Professor of Economics, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI)

KLAUS J. HOPT
Director (em.), Max Planck Institute for Comparative and International Private Law, European Corporate Governance Institute (ECGI)

MICHAEL C. JENSEN
Jesse Isidor Straus Professor of Business Administration, Emeritus, Harvard Business School, Co-Founder, Chairman, Managing Director and Integrity Officer, Social Science Electronic Publishing (SSEP), Inc., Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

HIDEKI KANDA
Professor of Law, University of Tokyo - Graduate School of Law and Politics

STEVEN NEIL KAPLAN
Neubauer Family Professor of Entrepreneurship and Finance, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

RAKESH KHURANA
Marvin Bower Professor of Leadership Development, Harvard Business School

DAVID F. LARCKER
James Irvin Miller Professor of Accounting, Stanford University - Graduate School of Business

CHRISTIAN LEUZ
J. Sondheimer Professor of International Economics, Finance and Accounting, University of Chicago - Booth School of Business, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI), Fellow, Center for Financial Studies (CFS), Fellow, University of Pennsylvania - Wharton Financial Institutions Center, Fellow, CESifo Research Network

MARCO PAGANO
Professor of Economics, University of Naples Federico II - Department of Economics and Statistics, President, Einaudi Institute for Economics and Finance (EIEF), Fellow, Centre for Economic Policy Research (CEPR), Fellow, European Corporate Governance Institute (ECGI)

RAGHURAM G. RAJAN
Eric J. Gleacher Distinguished Service Professor of Finance, University of Chicago - Booth School of Business, International Monetary Fund (IMF), National Bureau of Economic Research (NBER)

ROBERTA ROMANO
Sterling Professor of Law and Director, Yale Law School Center for the Study of Corporate Law, Yale Law School, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

ANDREI SHLEIFER
Professor of Economics, Harvard University - Department of Economics, Fellow, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

LAURA T. STARKS
Charles E. and Sarah M. Seay Regents Chair in Finance, University of Texas at Austin - Department of Finance

RENE M. STULZ
Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

JEAN TIROLE
Scientific Director, University of Toulouse 1 - Industrial Economic Institute (IDEI), University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ), Fellow, Centre for Economic Policy Research (CEPR)

LUIGI ZINGALES
Robert C. McCormack Professor of Entrepreneurship and Finance and David G. Booth Faculty Fellow, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER), Fellow, Centre for Economic Policy Research (CEPR), University of Chicago - Polsky Center for Entrepreneurship, Fellow, European Corporate Governance Institute (ECGI)