Author ORCID Identifier

https://orcid.org/0000-0002-6496-0356

Semester

Summer

Date of Graduation

2024

Document Type

Dissertation

Degree Type

PhD

College

College of Business and Economics

Department

Management

Committee Chair

Tianxu Chen

Committee Co-Chair

Olga Bruyaka Collignon

Committee Member

Olga Bruyaka Collignon

Committee Member

Hyeonsuh Lee

Committee Member

Gerry McNamara

Committee Member

Abhishek Srivastava

Abstract

This dissertation attempts to address the research question: how does the CEO’s compensation structure affect the firm’s competitive actions in the context of rivalry with competitors? Prior research has systematically examined antecedents of firms’ competitive actions, such as TMT characteristics, industry structure, exogenous shocks, competitive attacks and counterattacks. However, there is a lack of systemic research on how CEO compensation structure serves as a motivational factor of the firm’s competitive actions. The influence of the CEO on a firm’s competitive behavior has long interested scholars in strategy research. Thus, filling this gap in the literature is of significant importance.

This dissertation involves two empirical studies on this topic. The first study introduces the behavioral agency mechanisms to competitive dynamics research by examining how the CEO’s current versus prospective wealth, together with underwater wealth, may shape the firm’s competitive aggression in the competitive market based on two distinct types of competitive actions: (1) direct market aggression, which aims to directly attack rivals’ market share and enhance the firm’s performance by destroying the efficacy of the rivals, and (2) indirect market aggression, which seeks to avoid direct confrontation with rivals while still enhancing the firm’s performance through self-improvement. I find that CEO wealth, in general, is positively associated with competitive aggression: CEO prospective wealth is likely to increase direct market aggression than indirect market aggression, whereas CEO current wealth will likely increase indirect market aggression than direct market aggression. In contrast, CEO underwater wealth has a negative effect on the firm’s market aggression; specifically, CEO underwater wealth decreases the firm’s direct market aggression than indirect market aggression.

The second study introduces CEO wealth sensitivity as a source of executive motivation in competitive dynamics. CEO wealth sensitivity is reflected in two aspects: delta, which represents the sensitivity of CEO wealth to stock price, and vega, which indicates the sensitivity of CEO wealth to stock volatility. I argue that the delta and vega of CEO stock options have differential effects on the firm’s competitive actions in the rivalry with competitors. Specifically, CEO delta is positively associated with the firm’s competitive actions when rivals demonstrate high competitive aggression. This effect is less pronounced when rivals demonstrate low competitive aggression. In contrast, CEO vega is positively associated with the firm’s competitive actions, but this effect becomes less pronounced when rivals demonstrate high competitive aggression. I find empirical support for these arguments using a sample of S&P 500 firms in the time frame between 2005 and 2019.

Embargo Reason

Publication Pending

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