In Good Times but Not in Bad: The Role of Managerial Discretion in Moderating the Stakeholder Management and Financial Performance Relationship. (December 2016)

• Record Type: Journal Article
• Authors: Shahzad, Ali M.; Rutherford, Matthew A.; Sharfman, Mark P.
• Is Part Of: Business and society review. Volume 121:Number 4(2016)
• Page Start: 497
• Page End: 528
• Publication Date: 2016-12
• Subjects: Industries -- Social aspects -- United States -- Periodicals; Industries -- Social aspects -- Periodicals; International business enterprises -- Social aspects -- Periodicals; Responsabilité sociale; Déontologie; Morale des affaires; Entreprise; Entreprise multinationale; Aspect social; 658.408
• DOI: 10.1111/basr.12100
• Languages: English
• ISSNs: 0045-3609

Abstract

Abstract: We examine the role of managers in controlling the positive impact of stakeholder management (SM) on firm financial performance (FP) in the long term. We develop and test competing hypotheses on whether managers act as "good citizens" or engage in "self‐dealing" when allowed greater discretion. We test our assertions using dynamic panel data analysis of a sample of 806 U.S. public firms operating in 34 industries over 5 years (2005–2009). Our results indicate a nuanced influence of managerial discretion contexts on the SM‐FP relationship. We infer that given more latitude in decision making, as long as the "going is good" managers act as good citizens, but otherwise they revert to managerial self‐dealing. In light of our results, firms designing governance mechanisms to encourage managers to balance the needs of both shareholders and stakeholders must remain cognizant of contextual contingencies.