Executive Accountability Around the World: The Sources of Cross-National Variation in Firm Performance - CEO Dismissal Sensitivity

67 Pages Posted: 10 Nov 2012

See all articles by Craig Crossland

Craig Crossland

McCombs School of Business

Guoli Chen

INSEAD - Singapore

Date Written: October 3, 2012

Abstract

In this study, we investigate why CEOs seem to be held more accountable for poor firm performance in some countries than others. We integrate research from comparative corporate governance and agency theory to identify and evaluate four fundamental assumptions underlying most theoretical arguments linking performance and dismissal: (1) CEOs are personally responsible for firm performance outcomes; (2) boards/owners have the power to dismiss CEOs; (3) firm performance measures are meaningful; and (4) suitable alternative candidates for the CEO role are available. We argue that CEO accountability will vary in line with the extent to which these assumptions are more or less valid from one country to the next. We provide robust evidence – across both market-based and accounting based measures – that CEOs are more likely to be dismissed following poor firm performance in countries where managerial discretion is high, where firm performance measures are more meaningful, and where the CEO labor market is more developed. However, we do not find support for our prediction that CEO accountability varies in line with cross-national differences in CEO power asymmetry.

Suggested Citation

Crossland, Craig and Chen, Guoli, Executive Accountability Around the World: The Sources of Cross-National Variation in Firm Performance - CEO Dismissal Sensitivity (October 3, 2012). INSEAD Working Paper No. 2012/90/ST. Available at SSRN: https://ssrn.com/abstract=2156208 or http://dx.doi.org/10.2139/ssrn.2156208

Craig Crossland (Contact Author)

McCombs School of Business ( email )

Austin, TX 78712
United States

Guoli Chen

INSEAD - Singapore ( email )

Singapore

Register to save articles to
your library

Register

Paper statistics

Downloads
85
Abstract Views
884
rank
292,595
PlumX Metrics