CEO's commitment bias, ownership concentration, and innovation decision: Behavioral management of CEO's discretion

Hamza Fadhila, Mohamed Ali Azouzi and Jarboui Anis

Cogent Economics & Finance, 2014, vol. 2, issue 1, 1-24

Abstract: This paper deals with approving the effect of both a governance system and individual cognitive and emotional features in the financial analysis of a firms' innovation decision. After discussing the theoretical linking between ownership concentration and the CEO's attitude and behavior, we are showing on empirical grounds the relationship between the manager's behavior toward the innovation decision and his cognitive commitment level. The CEO's commitment bias and attitude conception were measured using a questionnaire. The data analysis was performed using the Bayesian network method on 220 Tunisian managers. In particular, we found that the application of a persuasion mechanism does not have a real impact on the alignment of the manager's attitude and behavior in key tasks, such as the innovation decision. The CEO's real behavior was more related to an important individual involvement in this behavior rather than to persuasive effort committed by block holders to make him contract this action. Attitude and behavior toward innovation appeared to be associated with psychological commitment "manager-task" which suggests that the disciplinary governance system plays no role in the process of a CEO's discretion management. We argue that the persuasion approach is not an interesting path in behavior alignment; yet, it should be reinforced with the commitment approach for understanding manager choices.

Date: 2014
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DOI: 10.1080/23322039.2014.948123

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