Engaging with Uncertainty: Three Empirical Studies

Engaging with uncertainty is vital in business because it can either generate or destroy wealth. My dissertation, comprising three empirical studies, investigates management decision-making and firm performance under uncertainty. The first study examines how organizational stress represented by resource constraints impacts firm performance. Drawing from the psychology-based Yerkes-Dodson (1908) Law, we propose that, while some amount of stress activated by constraints enhances performance, too much stress hampers performance. Using textual measures to gauge constraints that activate stress at the organizational level, we find an inverted-U relationship between constraints and return on assets. This relationship is more aligned with creativity, reflected by profit margin and innovation activities, than with efficiency in resource usage captured by asset turnover. My second study analyzes the compensation structure of the top leadership team (TLT), a group of executives responsible for navigating the organization through uncertain times. This study recognizes the importance of both the CEO's unique role and the dynamics among team members through: (1) CEO pay slice, reflecting payment for the CEO’s team leadership and management skill, and (2) pay dispersion among the CEO’s top team, capturing the weights on team versus individual based payments. We find that TLTs characterized by a large CEO pay slice and low degree of pay dispersion among the CEO’s top team outperform others in terms of return on assets. These results highlight complementary relations between CEO team leadership and team-based compensation in compensating TLTs. My third study analyzes how a strategic focus on balance sheet strength influences investment decisions and performance among Canadian oil and gas firms that navigate through uncertainties. Based on discussions with industry experts, we identify two groups of firms: those aggressively investing during favorable conditions – “making hay while the sun shines”, and those investing more prudently – “saving for a rainy day”. While investment in downturns declined generally for both types of firms, the decline in investment was significantly less for rainy day companies. These rainy day firms make shrewder acquisitions and achieve greater operational efficiency over time. However, rainy day firms have lower market valuations during upturns compared to making hay firms.

Name thesis:degree_name

Doctor of Philosophy (PhD)

Discipline thesis:degree_discipline

Business, Haskayne School of Business

Grantor dc:publisher.institution

Graduate Studies

Year dc:date.issued

2024

Author dc:creator

• Ma, Yan

Advisor dc:contributor.advisor

• Anderson, Mark

Committee members dc:contributor.committeemember

• Warsame, Hussein
• Sherer, Peter
• Tanaka, Atsuko
• Radhakrishnan, Suresh

Statement dc:rights

• University of Calgary graduate students retain copyright ownership and moral rights for their thesis. You may use this material in any way that is permitted by the Copyright Act or through licensing that has been assigned to the document. For uses that are not allowable under copyright legislation or licensing, you are required to seek permission.

Language dc:language.iso

en

DOI

https://doi.org/10.11575/PRISM/43600

OAI identifier oai:identifier

oai:ucalgary.scholaris.ca:1880/118757