Journal article

Can organizational identification mitigate the CEO horizon problem?

Like Jiang, Margaret Abernethy, Yu Kuang

Accounting, Organizations and Society | Elsevier | Published : 2019

Abstract

CEOs of retirement age are likely to exhibit a “horizon problem,” whereby they are reluctant to make decisions that are beneficial to the firm in the long term but potentially costly to the CEOs' personal wealth in the short term. We predict that a CEO with strong organizational identification (OI) will be less likely to behave opportunistically. Our results are consistent with our expectation when we examine three types of decisions that reflect the CEO horizon problem. Specifically, we find that retiring CEOs with strong OI are less likely to reduce research and development investments or decrease the firm's commitment to corporate social responsibility. Retiring CEOs with strong OI also b..

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Grants

Funding Acknowledgements

We greatly appreciate the comments of Ranjani Krishnan (the Editor), two anonymous reviewers, Mary Barth, Jan Bouwens, Gary Biddle, Michael Davern, Sandip Dhole, Shane Dikolli, Ian Gow, Jane Hronsky, Chung-Yu Hung, Xue Jia, David Larcker, Don Moser, Peter Kroos, Kelvin Law, Vic Naiker, Bo Qin, Rui Shen, Douglas Skinner, Naomi Soderstrom, Hun Tong Tan, Mark Wallis, Rencheng Wang, Huaxiang Yin, Yachang Zeng, Huai Zhang, and seminar participants at Nanyang Technological University, the University of Melbourne, and the 2018 AFAANZ Annual Conference in Auckland. We acknowledge excellent research assistance by Zhong Pan, Laure Pavaday, Manjula Pragasam, and Sijia Ren. Like Jiang and Flora Kuang acknowledge financial support from the Faculty of Business and Economics of the University of Melbourne.