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Research Details
Symbolic Management of Stockholders: Corporate Governance Reforms and Shareholder Reactions, Administrative Science Quarterly
Abstract
This paper examines the consequences of symbolic action in corporate governance. Sepecifically, it examines: 1. whether the stock market reacts favorably to specific governance mechanisms that convey the alignment of CEO and shareholder interests, such as the adoption of long-term incentive plans (LTIP), even if such plans are not actually implemented, 2. whether providing agency-related explanations for the LTIPs affects the stock market response, and 3. whether the symbolic adoption of LTIPs deters other governance reforms that would reduce CEO's control over their boards. Analysis of data from over 400 corporations over a 10-year period suggests that symbolic corporate actions can engender significant positive stockholder reactions and deter other, more substantive governance reforms, thus perpetuating power imbalances in organizations.
Type
Article
Author(s)
James D. Westphal, Edward Zajac
Date Published
1998
Citations
Westphal, James D., and Edward Zajac. 1998. Symbolic Management of Stockholders: Corporate Governance Reforms and Shareholder Reactions. Administrative Science Quarterly. 43(1): 127-153.
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