CEO Incentives and Customer-Supplier Relations

• 成果类型: Article
• 署名作者: Gu, Tiantian; Sanders, Nada R.; Venkateswaran, Anand
• 署名单位: Northeastern University; Indian Institute of Management (IIM System); Indian Institute of Management Bangalore
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12715
• 发表日期: 2017
• 页码: 1705-1727
• 关键词: Risk-taking; incentives; Executive compensation; option grants; supply chain

摘要

This study explores how suppliers adjust their relation-specific investments (RSI) in response to the different risk-taking incentives provided by the customer firm to its CEO, during normal and transition periods. We investigate this relation using 17,553 customer-supplier transactions over the 1993-2013 period. We find strong evidence consistent with the risk-taking argument. Specifically, we find that an increase in the risk-taking incentives of customer CEOs leads to a decline in suppliers' RSI in normal periods, but an increase in RSI during transition periods. We employ the FAS-123R mandate to show that an exogenous reduction in customer CEO's incentive pay increases suppliers' RSI. We reaffirm the effect with the passage of the Sarbanes-Oxley Act as a secondary quasi-natural experiment. Finally, we examine several scenarios that either amplify or attenuate the observed relation, based on factors such as financial constraints, distress, growth opportunities, industry competition, and other firm characteristics. Our study contributes to the literature that examines the interplay between corporate policy and product market relationships.