Does restricted stock turn CEOs into risk-averse managers? Insights from the regulatory focus theory

Authors

Rong Ma, Rutgers University
Wanrong Hou, The University of Texas Rio Grande ValleyFollow
Richard L. Priem, Texas Christian University
Peter Wright, The University of Memphis

Document Type

Article

Publication Date

4-2022

Abstract

Restricted stock awards carry upside and downside risks for CEOs. We follow a socio-cognitive perspective by suggesting that awards of restricted stock are viewed as potential gains or potential losses depending on each CEO's dominant regulatory focus. Regulatory focus, therefore, helps determine how a CEO responds to restricted stock awards. We also propose that the moderating effect of regulatory focus strengthens as firm complexity increases and as CEO tenure lengthens, because complexity and tenure both increase CEOs' reliance on heuristic information processing. Specifically, complexity restricts a CEO's cognitive capacity for thoughtful deliberation during decision making, and tenure affects a CEO's motivation to search for and process information thoroughly. We find general support for the hypotheses and discuss the implications of our findings for future research and practice.

Comments

Original published version available at https://doi.org/10.1016/j.lrp.2021.102165

Recommended Citation

Ma, R., Hou, W., Priem, R. and Wright, P., 2022. Does restricted stock turn CEOs into risk-averse managers? Insights from the regulatory focus theory. Long Range Planning, 55(2), p.102165.

https://doi.org/10.1016/j.lrp.2021.102165

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Publication Title

Long Range Planning

DOI

10.1016/j.lrp.2021.102165