A firm will respond to performance feedback, i.e. a comparison of its current performance with the goals to which it aspires, by means of changes in its search activity. There is…
Abstract
Purpose
A firm will respond to performance feedback, i.e. a comparison of its current performance with the goals to which it aspires, by means of changes in its search activity. There is an emerging body of literature that studies how such behavioral responses are shaped by important decision-makers inside firms. The study focuses on the corporate board – one of the most influential decision-making groups in terms of strategy. More specifically, the study aims to study the moderation effect of the size, turnover and age diversity of the board.
Design/methodology/approach
The sample is based on the largest listed German automobile and manufacturing firms followed between the years 2001 and 2015. The sample is analyzed using fixed-effects panel data models.
Findings
The findings indicate that the age diversity of the corporate board and, partially, also the turnover of its members moderate firms' responsiveness to performance feedback. On the other hand, the size of the board does not seem to play a role. The study, therefore, supports the notion of taking into account the characteristics of the corporate board when analyzing strategic decision-making and points to areas for further research.
Originality/value
The study contributes to the literature by empirically testing the moderating effect of three characteristics of corporate boards that have not been largely tested in the literature to date.