Michael Melton and Thomas S. Zorn
Tournament theory provides important insights into organizational reward systems. It examines the incentive properties of reward systems based on rank‐order rather than absolute…
Abstract
Tournament theory provides important insights into organizational reward systems. It examines the incentive properties of reward systems based on rank‐order rather than absolute individual performance. Tournament theory may explain the pattern of managerial pay. It may also explain risk‐taking behavior by mutual fund managers. We use data from the PGA tour to examine the pattern of risk‐taking by professional golfers in an explicit tournament. The PGA tour provides a natural laboratory where such behavior can be studied. Our evidence shows that behavior by players in golf tournaments is consistent with the predictions of tournament theory.
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Michael Melton and Thomas S. Zorn
Using data from the Senior PGA Tours we analyze the incentive effects of rank order tournaments. Previous studies using data from the PGA Tour reached conflicting conclusions. To…
Abstract
Using data from the Senior PGA Tours we analyze the incentive effects of rank order tournaments. Previous studies using data from the PGA Tour reached conflicting conclusions. To resolve the issue, the Senior PGA Tour was chosen for its unique format where players are not cut from the tournament before completion, eliminating any survival bias. The findings support the hypothesis that the level of prizes in Senior PGA tournaments influences players’ performance, indicating that tournaments can be used to motivate performance.
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Donna M. Dudney, Benjamas Jirasakuldech, Thomas Zorn and Riza Emekter
Variations in price/earnings (P/E) ratios are explained in a rational expectations framework by a number of fundamental factors, such as differences in growth expectations and…
Abstract
Purpose
Variations in price/earnings (P/E) ratios are explained in a rational expectations framework by a number of fundamental factors, such as differences in growth expectations and risk. The purpose of this paper is to use a regression model and data from four sample periods (1996, 2000, 2001, and 2008) to separate the earnings/price (E/P) ratio into two parts – the portion of E/P that is related to fundamental determinants and a residual portion that cannot be explained by fundamentals. The authors use the residual portion as an indicator of over or undervaluation; a large negative residual is consistent with overvaluation while a large positive residual implies undervaluation. The authors find that stocks with larger negative residuals are associated with lower subsequent returns and reward-to-risk ratio, while stocks with larger positive residuals are associated with higher subsequent returns and reward-to-risk ratio. This pattern persists for both one and two-year holding periods.
Design/methodology/approach
This study uses a regression methodology to decompose E/P into two parts – the portion of E/P than is related to fundamental determinants and a residual portion that cannot be explained by fundamentals. Focussing on the second portion allows us to isolate a potential indicator of stock over or undervaluation. Using a sample of stocks from four time periods (1996, 2000, 2001, and 2008, the authors calculate the residuals from a regression model of the fundamental determinants of cross-sectional variation in E/P. These residuals are then ranked and used to divide the stock sample into deciles, with the first decile containing the stocks with the highest negative residuals (indicating overvaluation) and the tenth decile containing stocks with the highest positive residuals (indicating undervaluation). Total returns for subsequent one and two-year holding periods are then calculated for each decile portfolio.
Findings
The authors find that high positive residual stocks substantially outperform high negative residual stocks. This is true even after risk adjustments to the portfolio returns. The residual E/P appears to accurately predict relative stock performance with a relatively high degree of accuracy.
Research limitations/implications
The findings of this paper provide some important implications for practitioners and investors, particularly for the stock selection, fund allocations, and portfolio strategies. Practitioners can still rely on a valuation measure such as E/P as a useful tool for making successful investment decisions and enhance portfolio performance. Investors can earn abnormal returns by allocating more weights on stocks with high E/P multiples. Portfolios of high E/P multiples or undervalued stocks are found to enjoy higher risk-adjusted returns after controlling for the fundamental factors. The most beneficial performance holding period return will be for a relatively short period of time ranging from one to two years. Relying on the E/P valuation ratios for a long-term investment may add little value.
Practical implications
Practitioners and academics have long relied on the P/E ratio as an indicator of relative overvaluation. An increase in the absolute value of P/E, however, does not always indicate overvaluation. Instead, a high P/E ratio can simply reflect changes in the fundamental factors that affect P/E. The authors find that stocks with larger negative residuals are associated with lower subsequent returns and coefficients of variation, while stocks with larger positive residuals are associated with higher subsequent returns and coefficients of variation. This pattern persists for both one and two-year holding periods.
Originality/value
The P/E ratio is widely used, particularly by practitioners, as a measure of relative stock valuation. The ratio has been used in both cross-sectional and time series comparisons as a metric for determining whether stocks are under or overvalued. An increase in the absolute value of P/E, however, does not always indicate overvaluation. Instead, a high P/E ratio can simply reflect changes in the fundamental factors that affect P/E. If interest rates are relatively low, for example, the time series P/E should be correspondingly higher. Similarly, if the risk of a stock is low, that stock’s P/E ratio should be higher than the P/E ratios of less risky stocks. The authors examine the cross-sectional behavior of the P/E (the authors actually use the E/P ratio for reasons explained below) after controlling for factors that are likely to fundamentally affect this ratio. These factors include the dividend payout ratio, risk measures, growth measures, and factors such as size and book to market that have been identified by Fama and French (1993) and others as important in explaining the cross-sectional variation in common stock returns. To control for changes in these primary determinants of E/P, the authors use a simple regression model. The residuals from this model represent the unexplained cross-sectional variation in E/P. The authors argue that this unexplained variation is a more reliable indicator than the raw E/P ratio of the relative under or overvaluation of stocks.
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This paper examines the determinants of corporate dividend policy in Jordan. The study uses a firm‐level panel data set of all publicly traded firms on the Amman Stock Exchange…
Abstract
This paper examines the determinants of corporate dividend policy in Jordan. The study uses a firm‐level panel data set of all publicly traded firms on the Amman Stock Exchange between 1989 and 2000. The study develops eight research hypotheses, which are used to represent the main theories of corporate dividends. A general‐to‐specific modeling approach is used to choose between the competing hypotheses. The study examines the determinants of the amount of dividends using Tobit specifications. The results suggest that the proportion of stocks held by insiders and state ownership significantly affect the amount of dividends paid. Size, age, and profitability of the firm seem to be determinant factors of corporate dividend policy in Jordan. The findings provide strong support for the agency costs hypothesis and are broadly consistent with the pecking order hypothesis. The results provide no support for the signaling hypothesis.
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Kaidi Aher and Vilma Luoma-Aho
Change in the public sector appears to be often met with practices borrowed from the private sector. However, implementing private sector practices is challenging (Brown…
Abstract
Change in the public sector appears to be often met with practices borrowed from the private sector. However, implementing private sector practices is challenging (Brown, Waterhouse, & Flynn, 2003), as, for example, the range of stakeholders and their legitimate demands are greater in the public sector (Wæraas & Byrkjeflot, 2012; Leitch & Davenport, 2002), and due to the political nature of affairs, there is more complexity and uncertainty (Sanders & Canel, 2013). In fact, when it comes to change, the public sector can be very different from the private sector due to its often more bureaucratic processes, political nature of decisions and obligations for both transparency and equality.
This chapter focuses on three core areas of organisational change communication: organisational culture, employees and management. The chapter reports findings from a systematic literature review of articles from 1990 to 2016 using thematic analysis in order to answer three research questions: Is change in the public sector different from change in the private sector? What is the perceived role of communication for public sector change efforts? What insights can be found from previous literature about three topics connected with change communication: employees, organisational culture and management?
To begin, we ask whether it is actually true that public sector change differs from private sector change. Then we will examine the results of the literature review on each of these three aspects: (1) organisational culture, (2) public sector employees and (3) change management. We will summarise our findings and will conclude with three propositions for future studies on public sector change communication, which all highlight the rising importance of engagement.
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The strategic management literature emphasizes the concept of business intelligence (BI) as an essential competitive tool. Yet the sustainability of the firms’ competitive…
Abstract
The strategic management literature emphasizes the concept of business intelligence (BI) as an essential competitive tool. Yet the sustainability of the firms’ competitive advantage provided by BI capability is not well researched. To fill this gap, this study attempts to develop a model for successful BI deployment and empirically examines the association between BI deployment and sustainable competitive advantage. Taking the telecommunications industry in Malaysia as a case example, the research particularly focuses on the influencing perceptions held by telecommunications decision makers and executives on factors that impact successful BI deployment. The research further investigates the relationship between successful BI deployment and sustainable competitive advantage of the telecommunications organizations. Another important aim of this study is to determine the effect of moderating factors such as organization culture, business strategy, and use of BI tools on BI deployment and the sustainability of firm’s competitive advantage.
This research uses combination of resource-based theory and diffusion of innovation (DOI) theory to examine BI success and its relationship with firm’s sustainability. The research adopts the positivist paradigm and a two-phase sequential mixed method consisting of qualitative and quantitative approaches are employed. A tentative research model is developed first based on extensive literature review. The chapter presents a qualitative field study to fine tune the initial research model. Findings from the qualitative method are also used to develop measures and instruments for the next phase of quantitative method. The study includes a survey study with sample of business analysts and decision makers in telecommunications firms and is analyzed by partial least square-based structural equation modeling.
The findings reveal that some internal resources of the organizations such as BI governance and the perceptions of BI’s characteristics influence the successful deployment of BI. Organizations that practice good BI governance with strong moral and financial support from upper management have an opportunity to realize the dream of having successful BI initiatives in place. The scope of BI governance includes providing sufficient support and commitment in BI funding and implementation, laying out proper BI infrastructure and staffing and establishing a corporate-wide policy and procedures regarding BI. The perceptions about the characteristics of BI such as its relative advantage, complexity, compatibility, and observability are also significant in ensuring BI success. The most important results of this study indicated that with BI successfully deployed, executives would use the knowledge provided for their necessary actions in sustaining the organizations’ competitive advantage in terms of economics, social, and environmental issues.
This study contributes significantly to the existing literature that will assist future BI researchers especially in achieving sustainable competitive advantage. In particular, the model will help practitioners to consider the resources that they are likely to consider when deploying BI. Finally, the applications of this study can be extended through further adaptation in other industries and various geographic contexts.
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Eunice Maytorena-Sanchez and Courtney E. Owens
In this chapter, the authors explore emotional discomfort and the use of live polling to enable business leaders on executive education leadership programmes to move beyond their…
Abstract
In this chapter, the authors explore emotional discomfort and the use of live polling to enable business leaders on executive education leadership programmes to move beyond their emotional comfort zones, to facilitate self-awareness and enhance reflective practice. Openly acknowledging and discussing one’s leadership weaknesses produce emotions which are not always easily shared, especially among business leaders. Yet, identifying emotions and acknowledging discomfort is key for reflective practice and a common failure in many leadership development programmes (LDP). The authors reflect on their experience in designing and delivering a custom LDP commissioned by a UK-based corporate client. The authors draw on the pedagogy of discomfort, emotions in leadership development, and the use of audience response system (ARS) technology to enable and facilitate the development of learner self-awareness.
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Marc Siegall and Susan Gardner
This paper examines the relationships between four contextual factors related to empowerment (communication with supervisor, general relations with company, teamwork, and concern…
Abstract
This paper examines the relationships between four contextual factors related to empowerment (communication with supervisor, general relations with company, teamwork, and concern for performance) and the four components of psychological empowerment (meaning, impact, self‐determination, and competence) identified by Spreitzer and her colleagues. We surveyed 203 employees of a manufacturing firm, using new and established measures of contextual factors and Spreitzer’s measures of empowerment components. The contextual factors were found to be differentially associated with the elements of psychological empowerment. Communication with supervisor and general relations with company were significantly related to the empowerment facets of meaning, self‐determination, and impact, but were not related to the facet of competence. Teamwork was related to meaning and impact. Concern for performance was related to meaning and self‐determination. These associations also varied by type of job. We conclude with implications for research and practice.
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Martin R.W. Hiebl and Birgit Feldbauer-Durstmüller
Benedictine abbeys are highly stable organisations that have existed for almost 1,500 years. The extant literature ascribes this stability in part to the notion of Benedictine…
Abstract
Purpose
Benedictine abbeys are highly stable organisations that have existed for almost 1,500 years. The extant literature ascribes this stability in part to the notion of Benedictine governance, which centres on the Rule of St Benedict (RB). An integral part of Benedictine governance is the cellarer, who plays a role comparable to that of a chief financial officer (CFO) in a traditional corporation. Unlike corporations, however, in which the CFO has emerged into a more important role over the past few decades, the cellarer has been an official position in Benedictine abbeys since the introduction of the RB in the sixth century. The present paper aims to explore the cellarer's role and assesses which parts of it could be reasonably transferred to the corporate world.
Design/methodology/approach
Informed by organisational role theory, the authors conducted a single case study in an Austrian Benedictine abbey. The authors used group discussions and semi-structured interviews as the main research instruments.
Findings
The authors find that the cellarer's behaviour shows strong signs of stewardship, which could serve as a role model for corporate CFOs. However, because of the studied abbey's situation of financial distress, the cellarer also experienced severe role conflicts rooted in his obedience to the abbot, the high involvement of the abbey in the local economy, and the cellarer's conscience as a Christian monk. From these findings, the authors describe those aspects of the cellarer's role that should thus be avoided for corporate CFOs.
Research limitations/implications
The presented findings are based on a single case study. Therefore, because of the contextual factors idiosyncratic to the abbey under investigation, the results must be interpreted with care. Nevertheless, the findings explain the cellarer's role and depict its potential benefits for the corporate world, which should induce further research.
Originality/value
This is the first paper to explore in-depth the cellarer's role as well as one of the first to transfer the potential benefits of single roles rooted in Benedictine governance to the corporate world.
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Generation Z comprises the newest cohort to enter the workforce, and they not content to be the Millennials’ younger sibling. Born between 1997 and 2012, Gen Z’s identity is…
Abstract
Generation Z comprises the newest cohort to enter the workforce, and they not content to be the Millennials’ younger sibling. Born between 1997 and 2012, Gen Z’s identity is shaped by being the first generation to come into a post-9/11 world, by the effects of the Great Recession on their parents’ and families’ economic well-being, by the proliferation of technology and social media, by the specter of school shootings and violence, and by the current period of reckoning with past and present racial injustice. The defining moment for this generation, however, is entering adulthood during or in the wake of a global pandemic that significantly changed both education and industry. The confluence of this new generation of career entrants, the dramatically shifting job forms and careers (e.g., contingent work and the gig economy), and the post-COVID landscape of work provides a rich and compelling research agenda for management and human resource management as Gen Z enters workplace and progresses through their careers. Little academic research has examined this generation and its complexity, but the business community is very interested in preparing for the influx of Gen Z into their organizations and as consumers. Gen Z is diverse, global, and mobile. They are defined by their almost symbiotic relationship with technology, but surprisingly desire in-person connection. This generation was hard hit by the COVID-19 pandemic, in their education, finances, relationships, and well-being. They are a generation in flux. Future research directions are explored and presented.