Cynthia E. Devers

Taking Stock of What We Know About Mergers and Acquisitions: A Review and Research Agenda

Scholars from multiple fields have shown increasing interest in the causes and consequences of mergers and acquisitions (M&A). Although this proliferation of research has the potential to significantly improve our understanding of M&A activity, absent is the necessary step of consolidating and integrating extant knowledge. Accordingly, this article develops a framework to organize and review recent empirical findings, principally from management, economics, and finance in which interest in acquisition behavior is high but also from other areas that have tangentially explored acquisition activity such as accounting and sociology. This article identifies patterns and theoretical gaps and provides recommendations for future research aimed at developing a more integrated M&A research agenda for management scientists.

Executive Compensation: A Multidisciplinary Review of Recent Developments:

The failure to document a consistent and robust relationship between executive pay and firm performance has frustrated scholars and practitioners for over three quarters of a century. Although recent compensation research has revealed alternative theoretical frameworks and findings that hold the potential to significantly improve our understanding of executive compensation, to date this diverse literature lacks theoretical integration. Accordingly, we develop a framework to organize and review these recent findings. We further identify methodological issues and concerns, discuss the implications of these concerns, and provide recommendations for future research aimed at developing a more integrated research agenda.

Moving Closer to the Action: Examining Compensation Design Effects on Firm Risk

We examine the influence of CEO equity-based compensation on strategic risk taking by the firm. Building off the Behavioral Agency Model, Agency Theory, and Prospect Theory, we develop arguments about when equity-based compensation elements will increase or decrease executive risk propensity and, in turn, strategic risk taking. Incorporating a behavioral perspective into our models of incentive alignment provides us with new and potentially more accurate predictions about how individual elements of CEO pay will influence risk selection, as well as how equity compensation interacts with cash compensation and with other factors to influence risk preferences. In general, this study provides evidence that CEO equity-based compensation significantly influences strategic risk, but that this influence is more nuanced and complex than conventional treatments of executive compensation assume. In particular, we find that different forms of equity-based pay exhibit dissimilar influences on strategic risk and that their influence changes as their value and vesting status change. Second, we find that cash-based forms of pay moderate the incentive properties of equity-based pay, indicating that cash-based pay may affect how executives perceive risks associated with equity pay. Finally, we find that stock price volatility and board actions each also moderate the incentive effects of equity-based pay. In sum, our results argue for increased recognition of a behavioral perspective on executive compensation and greater precision in how we measure and model the incentive alignment properties of CEO compensation.

A General Theory of Organizational Stigma

In recent years, the term stigma has been widely applied to organizations. However, scholars have yet to advance a theoretically consistent definition or comprehensive theory of organizational stigma. The purpose of this paper is to define the construct of organizational stigma and provide a general theory that explains the conditions under which organizational stigmas are likely to arise, how this process unfolds, and the initial effects stigmas inflict on organizations. In doing so, we distinguish organizational stigma from both individual-level stigma and the organizational-level constructs of reputation, status, celebrity, and legitimacy. We then build upon multiple streams of research to develop a richer theoretical explanation of the roles social context, social processes, and social actors play in the origination and effects of an organizational stigma.

Management Theory Applications of Prospect Theory: Accomplishments, Challenges, and Opportunities

The authors review management research drawing on prospect theory, focusing primarily on studies in strategic management and organizational behavior/human resource management. These studies have made valuable contributions to several prominent research streams. However, they commonly underutilize or misconstrue central arguments from prospect theory. Furthermore, they illustrate that applying prospect theory in organizational settings poses several theoretical and methodological challenges. Thus, the authors review these studies, critically analyze them, and make suggestions to enrich future work.

Minding the Gap Antecedents and Consequences of Top Management-To-Worker Pay Dispersion

Management researchers have long been concerned with the antecedents and consequences of managerial compensation. More recently, scholarly and popular attention has turned to the gap in pay between workers at the highest and lowest levels of the organization, or “pay dispersion.” This study investigates the performance implications of pay dispersion on a longitudinal (10-year) sample of publicly traded firms from multiple industries. We combine explanations based on tournament theory and equity theory to develop a model wherein pay dispersion has opposing effects on a firm’s short-term performance and their trend in performance over time. We also show that ownership is a key antecedent of pay dispersion. Specifically, transient institutional investors (who have short time horizons and equity stakes in a wide variety of firms) positively influence pay dispersion whereas dedicated institutional investors (who have longer investment time horizons and equity stakes in fewer firms) negatively influence pay dispersion. We discuss the wide-ranging implications of these findings for scholars, managers, and policy makers alike.

Group decision process and incrementalism in organizational decision making

In two studies examining resource allocation, support is found for the notion that group decisions are affected in systematic ways depending on whether or not there was individual consideration of the problem before meeting as a group. Specifically, compared to no prior consideration groups, prior consideration groups (1) escalate their commitment more in progress (i.e., ongoing) decisions,and (2) are less willing to concentrate resources on a single project in adoption (i.e., resource utilization) decisions. The findings challenge the blanket assertion that divergent views in a group decision context is always related to better decisions.

Integrating Behavioural and Economic Concepts of Risk into Strategic Management: The Twain Shall Meet

This paper develops an integrated framework of risk management and strategic competitive advantage that incorporates behavioural and economic notions of risk. The resulting model argues for the importance of risk-taking to sustainable competitive advantage and ultimately to firm performance. The model integrates framing effects of attainment discrepancy, transaction costs from implicit contracts theory and capital costs from finance theory. The proposed model suggests that continuous risk-taking by firms may help sustain competitive advantage and thus lower firm risk. This, in turn, effectively increases market returns to shareholders by ensuring earnings growth while simultaneously reducing the risk premium discount attached to a firm’s future income stream.

Peering into the Executive Mind: Expanding Our Understanding of the Motives for Acquisitions

Abstract In this chapter, we review recent work examining the influence individual executive characteristics exhibit on acquisition behavior, often in service of their private interests. In doing so, we outline the findings of this limited research, explore possible alternative explanations and factors, and discuss several novel data collection and methodological techniques that scholars have advanced in the upper echelon context, in recent years. As we discuss, we believe that researchers can more fruitfully explore the underlying personal, psychological, and social factors that motivate acquisition activity, by augmenting current techniques with these methodological innovations.

Comments on Stigma Versus Legitimacy

Interest in the study of negative social evaluations is increasing (e.g., Devers, Dewett, Mishina, & Belsito, 2009; Hampel & Tracey, 2019; Helms & Patterson, 2014; Hudson & Okhuysen, 2009; Semadini, Cannella, Fraser, & Lee, 2008; Tracey & Philips, 2016; Vergne, 2012). Given that not so long ago, there was a dearth of research on the subject, it is encouraging to see so much interesting research devoted to studying the antecedents and consequences of negative social evaluations. At the same time, however, we are concerned that the influx of new research runs the risk of blurring the boundaries between similar but theoretically distinct constructs. Although the integration of different streams of research can generate rich theorizing and advance our understanding in meaningful ways, we suggest that the surge of interest in negative social evaluations has created the need to distinguish and clarify the boundaries and relationships between similar constructs, in particular, legitimacy, illegitimacy, and organizational stigma. The two papers in the dialog piece confront this issue head on. On one hand, Hampel and Tracy advance the intriguing and provocative notion that organizational stigma resides at the far negative end of a spectrum of moral evaluation, with legitimacy and elevation at the opposite end. On the other hand, Helms, Patterson, and Hudson (2019, p. 3) argue that equating organizational “stigma to the broader, more generalized, construct as legitimacy’s opposite is fundamentally flawed.” Our belief is that although the construct of illegitimacy, if it existed, and organizational stigma might possibly share some characteristics, it is not entirely clear that it is necessarily useful or appropriate to equate the two. In this response, we examine these constructs, to delineate the differences among them. Our argument is threefold. First, that keeping the two constructs separate is not likely to prevent scholars from studying the complex interrelationships between the two; second, that subsuming stigma within institutional analyses is not necessarily likely to help our understanding of stigmas; finally, that the illegitimacy and stigma constructs differ in important enough ways to make them difficult to combine them in meaningful ways. One argument that Hampel and Tracey (2019) make for placing moral illegitimacy and stigma on a single continuum of moral evaluation is that it would allow scholars to explore “how audiences incorporate the various evaluations of other stakeholders in making their own judgments” rather than study “specific judgments (e.g., stigmatization) in isolation” (p. 15). Although this is indeed a worthy endeavor, a single continuum is unnecessary for studying multiple types of social evaluations. Indeed, although status, reputation, and celebrity are all built on different theoretical bases and do not exist on a single continuum, scholars have nonetheless been able to distinguish between the joint and independent effects of status and reputation on receiving bids to the NCAA (The National Collegiate Athletic Association) basketball tournament (Washington & Zajac, 2005), how status and reputation affects the selection of auditors (Jensen & Roy, 2008), how status and reputation affect NBA (The National Basketball Association) team quality and revenues (Ertug & Castellucci, 2013), and how firm celebrity and reputation affect both the likelihood and reactions to a firm having an earnings surprise (Pfarrer, Pollock, & Rindova, 2010). As these, and undoubtedly other, studies show, social evaluations do not need to be on the same continuum to be studied together. Second, equating stigma with the highest level of moral illegitimacy would necessarily entail subsuming stigma research under the broader umbrella of institutional research. As numerous scholars, and even a cursory familiarity with the organizational literature will reveal, it would be difficult to overstate the importance of institutional theory and institutional research more broadly to organizational theorists, sociologists, and strategy scholars given both its ubiquity and the important contributions and insights that have arisen from institutional studies (e.g., Greenwood, Oliver, Sahlin, & Suddaby, 2008; Haveman & David, 2008). At the same time, however, institutional arguments have been “used to explain a wide range of phenomena and was used in combination with many other perspectives.” (Haveman & David, 790898 JMIXXX10.1177/1056492618790898Journal of Management InquiryDevers and Mishina research-article2018