Corporate Actions and Outcomes Under Multifaceted Market Landscape

This thesis explores the multifaceted impact of competitive dynamics on firm performance and market behaviour across three empirical studies. The first study introduces a novel metric for labour market competitiveness, revealing its influence on stock prices. The second study examines how a firm's strategic orientation is shaped by CEO Industry Tournament Incentives. The final study shifts the lens to the broader Top Management Teams (TMT), examining the implications of psychological diversity, specifically confidence diversity, on a firm's innovation efficacy. Together, these studies provide insights into the influence of competitive pressures spanning the labour market, organizational, and individual dimensions on corporate actions and outcomes. In the first study, I introduce a distinctive methodology to gauge labour market competitiveness, emphasizing the intensifying competition stemming from the surging demand for analogous occupations. This metric uncovers a correlation between escalating labour market competitiveness and a decline in aggregate market excess returns over the ensuing three to twelve months, reinforcing the 'war for talent' paradigm. The underlying mechanism reveals that amplified labour market competition leads to adverse cash flow shocks, evident through escalating personnel-related costs and dwindling cash reserves. Further exploration underscores that investors perceive an intensely competitive labour market as a risk factor, demanding higher returns for stocks that are more vulnerable to this particular risk. The second study narrows its focus to the CEO labour market, highlighting the critical role of the relative pay disparity between a given CEO and the highest-earning CEO among a group of similar firms. This disparity is referred to as 'CEO industry tournament incentives.' Drawing from tournament theory, a larger pay gap intensifies the career-enhancement incentives for the focal CEO, subsequently steering the firm's strategic compass. CEOs with pronounced industry tournament incentives exhibit a propensity for distinctive strategies, leading to increased strategic distinctiveness. A more detailed analysis indicates that tournament incentives enhance firm performance only when paired with strategic distinctiveness. The last study of this thesis pivots to the broader TMT spectrum. It pioneers a construct that melds the Upper Echelons theory with group information-processing theory, subsequently scrutinizing the impact of TMT confidence diversity on corporate innovation paradigms. Empirical findings underscore a positive nexus between TMT confidence diversity and corporate innovation prowess, underscoring the benefits of diversity. Further, this association is moderated by task complexity, resonating with the group information-processing theory's assertion that complex decision-making landscapes necessitate collaborative information assimilation within groups. Together, these three studies included in this thesis enriches the literature by shedding light on the multifaceted ways market and organizational dynamics influence corporate actions and outcomes. Diverse competitive pressures shape firms' investment decisions, strategic directions, and market valuations. This thesis endeavours to demystify the heterogeneity in corporate behaviours and the market's differential responses to these actions.

Author dc:creator

• Li, Shihe

Advisors dc:contributor.advisor

• Zurbrugg, Ralf
• Yu, Chia-Feng (International Business School Suzhou, Xi'an Jiaotong-Liverpool University, China)

• Labour market competitiveness
• CEO industry tournament incentives
• TMT confidence diversity

Language dc:language.iso

en

Handle dc:identifier.uri

https://hdl.handle.net/2440/140446

OAI identifier oai:identifier

oai:digital.library.adelaide.edu.au:2440/140446