CEO Regulatory Focus as an Interpretive Frame: An Empirical Examination of Investor Perceptions in the Context of Earning Deviations

Existing research has documented the role that CEOs, and especially CEO regulatory focus, play in shaping firm strategy. Yet, the impact of CEOs is constrained by that of the other executives in the firm, and the strategic leadership literature has repeatedly called for more research that examines the interaction between the CEO and other executives, most notably the CFO. We respond to this call and examine how the CEO’s and CFO’s regulatory focus interact to shape the firm’s corporate strategy and what happens in cases where they are misaligned. Making use of micro-data on the regulatory focus of CEOs and CFOs and their firms’ corporate strategy actions, we find that both are important drivers of the firms’ growth-oriented initiatives, and that this impact is even amplified if they align. In cases of misalignment, we find that on average CEOs prevail, but this effect depends on CEOs’ power. Interestingly, misalignment between CEO and CFO regulatory focus has positive performance implications, suggesting important complementarities between CEOs and CFOs. Overall, our study contributes to the strategic leadership literature by explicating important interactions and complementarities between the CEO and CFO with regards to their regulatory focus in shaping firm strategic outcomes. We also contribute to the literature on corporate strategy by highlighting important executive-interaction based drivers of corporate strategic decisions. Finally, we also extend the literature on the micro-foundations of strategy by showing how important characteristics of executives interact and aggregate to shape the firm’s strategic initiatives and its performance.

We integrate upper echelons theory with regulatory focus theory and expand the research to examine the relationship of chief executive officers’ (CEOs’) promotion and prevention focus and workplace injuries. We develop argument that the desire for advancement and growth associated with CEOs of a high promotion focus leads to more workplace injuries while a pursuit for stability and security associated with CEOs of a high prevention focus leads to fewer workplace injuries. Based on the regulatory fit framework, we further identify the a contingent framework that identifies CEO- (i.e., incentives of current and prospective wealth associated with stock options), firm- (i.e., performance aspiration), and external capital market-level (i.e., analysts downgrades) factors which provide the boundary conditions of the effects of CEO promotion and regulatory focus on workplace injuries. Based on a sample of S&P500 firms and their plant-level injury data during the period of 2005-2011, we find general support for these hypotheses. The results highlight the important role of CEO regulatory focus and illustrate its unforeseen consequences beyond firm strategies to affect other stakeholders’ interests (i.e., employees). We discuss our contribution to strategic leadership literature as well as stakeholder literature.

With the ongoing coronavirus disease 2019 (COVID-19) pandemic, technological, socio-political, and institutional changes have led to a “new normal” competitive landscape, firms must make longer-term strategic changes to deal with short-term discontinuities and great uncertainties to acquire sustainable advantage. Based on regulatory focus theory and upper echelons theory, this study explores the relationship between CEO regulatory focus and corporate strategic change and examines the moderating effects of analysts’ optimism bias in earning forecasts. The study uses data from A-share-listed companies in China during 2010–2018. We find that CEO promotion focus is positively associated with strategic change, while CEO prevention focus is negatively associated with strategic change. We also find analysts’ optimism bias in earning forecasts would moderate these relationships.

This study draws on the regulatory focus theory to postulate that CEOs who are predominantly promotion focused would demonstrate more innovation in novel technological areas, while CEOs who are predominantly prevention focused would not do so. We further investigate contextual factors would moderate the effect of CEO relative regulatory focus including CEO education, firm absorptive capacity, and industry technological uncertainty. Results based on three high-technology industries in the U.S. suggest that the extent to which a CEO is more promotion than prevention focused will motivate the CEO to generate innovation in new technological fields. Our results also indicate that this effect is contingent on certain boundary conditions including CEO education, firm absorptive capacity, and industry technical uncertainty. The findings suggest that the degree to which a CEO is relatively promotion focused influences his or her motivation in engaging in exploratory innovation.

This paper sheds light on the effect of CEO regulatory focus on organizational corporate social responsibility (CSR) activities based on regulatory fit. It is proposed that CEOs with different regu...

In this dissertation, the reader finds three empirical studies using multiple methods to shed light on influence within the upper echelons. Chapter 1 provides the motivation and overarching framework for the dissertation. Chapter 2 sets the basis for the dissertation by taking on a holistic perspective. Specifically, this chapter looks at the board/director-level antecedents of influence and at both the observable (holding a formal role, capability, and prototypicality) and underlying (social dominance and being socially disruptive and a task challenger) characteristics. Overall, this chapter is motivated by the desire to better comprehend how that influence is obtained and who has influence within the board. Chapter 3 takes on an interface (i.e., director–CEO and director–chair) perspective and looks at both the observable (director and chair gender) and underlying (director status and CEO social dominance) characteristics to comprehend influence processes. Overall, Chapter 3 represents an example of what influence processes within the board may look like in practice and how internal and external contingencies can impact these processes. Chapter 4 looks at the executive level and at both the observable (CEO experience) and underlying (CEO regulatory focus) characteristics. This chapter focuses on the CEO’s ability to influence his or her firm’s strategic outcomes and how the relational interface impacts his or her ability to do so. Chapter 5 discusses how the dissertation adds to the current literature and highlights the theoretical and practical implications of this dissertation’s core findings, discusses the most critical limitations, and explores avenues for future research.

Practitioners and researchers often look toward the moves of CEOs who have successfully led their firms to strategy uniqueness—leapfrogging over competitors by deviating from industry norms. Yet, such bold moves tend to be met with organizational resistance precisely because of their unprecedented nature. Drawing on regulatory focus theory and the behavioral theory of the firm, we theorize that while a promotion focus is a key aspirational driver for CEOs to pursue strategy uniqueness, CEOs must also have an in-depth understanding of their firms to successfully translate their strategically unique ideas into reality. We test these expectations in a sample of S&P 500 firms spanning 2010–2020, measuring strategy uniqueness using segment-level data and operationalizing CEO regulatory focus through content analysis of approximately 24,000 quarterly earnings calls. Our findings confirm that CEO promotion focus positively relates to strategy uniqueness and that organizational experience strengthens this relationship.

Research and development (R&D) is a key contributor to organizations’ pursuit of innovation. In turn, CEOs can influence important decisions related to changes in R&D spending—the kind of spending with the potential to lead to innovation. We seek to understand the motivation and conditions under which CEOs may influence R&D spending changes. Drawing on regulatory focus theory, this study investigates how CEO motivation affects changes in firm R&D spending. We explore the effect of CEO promotion and prevention foci on yearly R&D increase. We use a panel dataset of 688 S&P 1500 firms to test our hypotheses. Our findings suggest a negative relationship between CEO prevention focus and R&D increase, while CEO promotion focus produces no meaningful effect. We further test CEO compensation as a moderating mechanism, testing both incentive and fixed CEO compensation. We find that incentive compensation negatively moderates the relationship between CEO promotion focus and R&D increase, and positively moderates the relationship between CEO prevention focus and R&D increase. Additionally, CEO fixed income negatively moderates the relationship between CEO prevention focus and R&D increase. Based on these results we discuss theoretical implications of our findings, including differing effects of CEO regulatory focus on firm risk‐taking behavior and how compensation packages may alter those effects. We further discuss the practical necessity for boards of directors to understand both the R&D goals of an organization and the individual motivational orientation of CEOs when crafting compensation packages.