Corporate Investing as a Response to Economic Downturn: Prospect Theory, the Behavioural Agency Model and the Role of Financial Slack

British Journal of Management

Volumn 23, Issue SUPPL. 1, 2012, Pages

  Zona, Fabio ^a  

^a BOCCONI UNIVERSITY   (Italy)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84860841696     PISSN: 10453172     EISSN: 14678551     Source Type: Journal    
DOI: 10.1111/j.1467-8551.2012.00818.x     Document Type: Article

References (64)

1. Baysinger, B. and R. E. Hoskisson (1989). 'Diversification strategy and R&D intensity in multiproduct firms', Academy of Management Journal, 32, pp. 310-332.
2. Becker, B. E. and R. L. Cardy (1986). 'Influence of halo error on appraisal effectiveness: a conceptual and empirical re- consideration', Journal of Applied Psychology, 71, pp. 662-671.
3. Bourgeois, L. (1981). 'On the measurement of organisational slack', Academy of Management Review, 6, pp. 29-39.
4. Bourgeois, L. J. and J. V. Singh (1983). 'Organisational slack and political behaviour within top management groups', Academy of management Proceedings, pp. 43-49.
5. Boyd, B. K., T. K. Haynes, and F. Zona (2010). 'Dimensions of CEO-board relations', Journal of Management Studies, 48, pp. 1892-1923.
6. Bromiley, P. (1991). 'Testing a causal model of corporate risk taking and performance', Academy of Management Journal, 34, pp. 37-59.
7. Bromiley, P., K. D. Miller and D. Rau (2001). 'Risk in strategic management research'. In M. A. Hitt, E. R. Freeman, and J. S. Harrison (eds), Handbook of Strategic Management, pp. 259-289. Oxford: Blackwell.
8. Cheng, S. (2008). 'Board size and the variability of corporate performance', Journal of Financial Economics, 87, pp. 157-176.
9. Crawford, C. M. (1987). New Product Management. Burr Ridge, IL: Irwin.
10. Cyert, R. M. and J. G. March (1963). A Behavioural Theory of the Firm. Englewood Cliffs, NJ: Prentice Hall.
11. Cyert, R. M. and J. G. March (1992). A Behavioural Theory of the Firm, 2nd edn. Cambridge, MA: Blackwell.
12. Daily, C. M., D. R. Dalton and A. A. Cannella (2003). 'Corporate governance: decades of dialogue and data', Academy of Management Review, 28, pp. 371-382.
13. Dalton, D. R., C. M. Daily, A. E. Ellstrand and J. L. Johnson (1998). 'Meta-analytic reviews of board composition leadership structure and financial performance', Strategic Management Journal, 19, pp. 269-290.
14. Dalton, D. R., M. A. Hitt, S. T. Certo, C. M. Dalton (2008). 'The fundamental agency problem and its mitigation: independence, equity, and the market for corporate control'. In J. P. Walsh and A. P. Brief (eds), Annals of the Academy of Management, Vol. 1, pp. 1-64. New York, NY: Lawrence Erlbaum.
15. Damanpour, F. (2010). 'An integration of research findings of effects of firm size and market competition on product and process innovations', British Journal of Management, 21, pp. 996-1010.
16. Devers, C. E., G. McNamara, R. M. Wiseman and M. Arrfelt (2008). 'Moving closer to the action: examining compensation design effects on firm risk', Organisation Science, 19, pp. 548-566.
17. Fama, E. and M. Jensen (1983). 'Separation of ownership and control', Journal of Law and Economics, 26, pp. 301-325.
18. Fowler, F. J. (1993). Survey Research Methods. Newbury Park, CA: Sage.
19. Fraga, M., O. Martins and P. Anciaes (2008). 'Patterns of innovation diffusion and technological competition in Portuguese manufacturing and service industries', International Review of Applied Economics, 22, pp. 353-372.
20. Gómez-Mejía, L. and D. B. Balkin (1992). Compensation, Organisational Strategy and Firm Performance. Cincinnati, OH: Southwestern.
21. Gómez-Mejía, L. R., K. T. Haynes, M. Núñez-Nickel, K. J. L. Jacobson and J. Moyano-Fuentes (2007). 'Socioemotional wealth and business risks in family-controlled firms: evidence from Spanish olive oil mills', Administrative Science Quarterly, 52, pp. 106-137.
22. Groves, R. M., R. B. Cialdini and M. P. Couper (1992). 'Understanding the decision to participate in a survey', Public Opinion Quarterly, 56, pp. 475-495.
23. Hambrick, D. C. and R. A. D'Aveni (1988). 'Large corporate failures as downward spirals', Administrative Science Quarterly, 33, pp. 1-23.
24. Hambrick, D. and C. C. Snow (1977). 'A contextual model of strategic decision making in organisations', Academy Management Proceedings, 37, pp. 109-112.
25. Haynes, T. K. and A. Hillman (2010). 'The effect of board capital and CEO power on strategic change', Strategic Management Journal, 31, pp. 1145-1163.
26. Holmes, R., P. Bromiley, C. Devers, T. Holcomb and McGuire J. B. (2011). 'Management theory applications of prospect theory: accomplishments, challenges, and opportunities', Journal of Management, 37, pp. 1069-1107.
27. Hoskisson, R. E., M. A. Hitt, R. A. Johnson and W. Grossman (2002). 'Conflicting voices: the effects of institutional ownership heterogeneity and internal governance on corporate innovation strategies', Academy of Management Journal, 45, pp. 697-716.
28. House, R., Rousseau, D. M. and M. Thomas-Hunt (1995). 'The meso paradigm: a framework for the integration of micro and macro organisational behaviour'. In L. L. Cummings and B. M. Staw (eds), Research in Organisational Behaviour, Vol. 17, pp. 71-114. Greenwich, CT: JAI Press.
29. Istat (2008). Analysis of Firm Innovativeness. Rome: Istat.
30. Johnson, J. L., C. M. Daily and A. E. Ellstrand (1996). 'Boards of directors: a review and research agenda', Journal of Management, 22, pp. 409-438.
31. Kahneman, D. and A. Tversky (1979). 'Prospect theory: an analysis of decision under risk', Econometrica, 47, pp. 263-292.
32. Kim, H, H. Kim, and P. M. Lee (2008). 'Ownership structure and the relationship between financial slack and R&D investments: evidence from Korean firms', Organisation Science, 19, pp. 404-418.
33. Kor, Y. Y. (2006). 'Direct and Interaction effects of top management team and board compositions on R&D investments strategy', Strategic Management Journal, 27, pp. 1081-1099.
34. Larraza-Kintana, M., R. M. Wiseman, L. R. Gómez-Mejía and T. M. Welbourne (2007). 'Disentangling compensation and employment risks using the behavioural agency model', Strategic Management Journal, 28, pp. 1001-1019.
35. Lubatkin, M. and H. M. O'Neill (1987). 'Merger strategies and capital market risk', Academy of Management Journal, 30, pp. 665-684.
36. Laughhunn, D. J., J. W. Payne and R. Crum (1980). 'Managerial risk preferences for below-target returns', Management Science, 26, pp. 1238-1249.
37. Lee, P. M., and H. O'Neill (2003). 'Ownership structures and R&D investments of U.S. and Japanese firms: agency and stewardship perspectives', Academy of Management Journal, 46, pp. 212-225.
38. MacCrimmon, K. R. and D. A. Wehrung (1990). 'Characteristics of risk taking executives', Management Science, 36, pp. 422-435.
39. March, J. G. (1988). 'Variable risk preferences and adaptive aspirations', Journal of Economic Behaviour and Organisation, 9, pp. 5-24.
40. March, J. G. and Z. Shapira (1987). 'Managerial perspectives on risk and risk taking', Management Science, 33, pp. 1404-1418.
41. March, J. G. and Z. Shapira (1992). 'Variable risk preferences and the focus of attention', Psychological Review, 99, pp. 172-183.
42. March, J. G. and H. Simon (1958). Organizations. New York, NY: Wiley
43. Miller, K. D. and W. Chen (2004). 'Variable organizational risk preferences: tests of the March-Shapira model', Academy of Management Journal, 47, pp. 105-115
44. Moses, D. O. (1992). 'Organisational slack and risk-taking behaviour: tests of product pricing strategy', Journal of Organisational Change Management, 5, pp. 38-54.
45. Murphy, K. R. and J. N. Cleveland (1991). Performance Appraisal: An Organizational Perspective. Boston, MA: Allyn & Bacon.
46. Nohria, N. and R. Gulati (1996). 'Is slack good or bad for innovation?' Academy of Management Journal, 39, pp. 1245-1264.
47. Palmer, T. B. and R. M. Wiseman (1999). 'Decoupling risk taking from income stream uncertainty. A holistic model of risk', Strategic Management Journal, 20, pp. 1037-1062.
48. Payne, J. W., D. L. Laughhunn and R. Crum (1980). 'Translation of gambles and aspiration level effects in risky choice behavior', Management Science, 26, pp. 1039-1060.
49. Pettigrew, A. (1992). 'On studying managerial elites', Strategic Management Journal, 13(Special Issue), pp. 163-182.
50. Sanders, W. G. (2001). 'Behavioral responses of CEO stock ownership and stock option pay', Academy of Management Journal, 44, 477-492.
51. Segrestin, B. and A. Hatchue (2011). 'Beyond agency theory, a post-crisis view of corporate law', British Journal of Management, 22, pp. 484-499.
52. Shimizu, K. (2007). 'Prospect theory, behavioural theory and the threat rigidity thesis: combinative effects on organisational decisions to divest formerly acquired units', Academy of Management Journal, 50, pp. 1495-1514.
53. Siegel, S. and N. J. Castellan (1988). Nonparametric Statistics for the Behavioural Sciences, 2nd edn. New York, NY: McGraw-Hill.
54. Simon, H. A. (1947). Administrative Behavior. New York, NY: Macmillan.
55. Staw, B. M., L. E. Sanderlands and J. E. Dutton (1981). 'Threat rigidity effects in organisational behaviour: a multilevel analysis', Administrative Science Quarterly, 26, pp. 501-524.
56. Sudarsanam, S. and J. Lai (2001). 'Corporate financial distress and turnaround strategies: an empirical analysis', British Journal of Management, 12, pp. 183-199.
57. Thompson, J. (1967). Organisations in Action. New York, NY: McGraw-Hill.
58. Thaler, R. H. and E. J. Johnson (1990). 'Gambling with the house money and trying to break even: the effects of prior outcomes on risky choice', Management Science, 36, pp. 643-660.
59. Tversky, A. and D. Kahneman (1981). 'The framing of decisions and psychology of choice', Science, 211, pp. 453-458.
60. Tversky, A. and D. Kahneman (1986). 'Rational choice and the framing of decisions', Journal of Business, 59, pp. S251-S278.
61. Tversky, A. and D. Kahneman (1991). 'Loss aversion in riskless choice: a reference-dependent model', Quarterly Journal of Economics, 106, pp. 1039-1061.
62. Tversky, A. and Kahneman, D. (1992). 'Advances in prospect theory: cumulative representation of uncertainty', Journal of Risk and Uncertainty, 5, pp. 297-323.
63. Wiseman R. M. and L. R. Gómez-Mejía (1998). 'A behavioural agency model of managerial risk taking', Academy of Management Review, 23, pp. 133-153.
64. Zona, F. and A. Zattoni (2007). 'Beyond the black box of demography: board processes and task effectiveness within Italian firms', Corporate Governance: An International Review, 15, pp. 852-864.