In this study, we examine how personality attributes and a coordinated compensation design jointly contribute to complementarity in the CEO–CFO dyad. Drawing on regulatory focus theory, we propose that the combination of a CEO with a promotion focus and a CFO with a prevention focus benefits firms. In such a dyad, promotion-focused CEOs bring creativity, speed, and eagerness to advancement, whereas prevention-focused CFOs attend to vigilance, helping to keep promotion-focused CEOs grounded. We further argue that the effectiveness of this CEO–CFO dyad depends on promotion-focused CEOs being open to critical advice from prevention-focused CFOs. To make CEOs more amenable to CFOs' advice, we suggest similar compensation plans that foreground common objectives. We empirically test our arguments by focusing on the CEO–CFO dyad's influence on investment spending and firm performance in a longitudinal sample covering more than 10,000 firm years. Our results indicate a positive association between CEO promotion focus and investment spending, as well as firm performance. We further find that CFO prevention focus weakens the association between CEO promotion focus and investment spending, but strengthens the association with firm performance. These moderating influences of CFO prevention focus are more pronounced for higher compensation similarity in the CEO–CFO dyad. In sum, our findings exemplify that deliberately considering CEO and CFO personality attributes and their compensation design jointly strengthens the functioning of the CEO–CFO dyad.

ABSTRACT The complexity of value‐based management (VBM) is often not captured in empirical research. In particular, potential differences in the extent of VBM implementation are not considered. Firms are predominantly classified dichotomously into either VBM “adopters” or “non‐adopters.” In this study, we aim to fill this gap by introducing a framework to assess differences in the extent of VBM implementation (VBM‐sophistication) based on publicly available data. This approach enables us to study determinants of VBM‐sophistication based on a hand‐collected data set comprising 2,683 firm‐year observations from 16 European countries between 2005 and 2014. Specifically, we investigate (i) whether potential economic benefits associated with VBM implementation lead to a higher level of VBM‐sophistication, and (ii) if this relation is influenced by extra‐organizational institutions (e.g., industry norms). Our results indicate that companies exhibit higher VBM‐sophistication if certain firm characteristics that increase the potential economic benefits of VBM are present. Moreover, our study provides evidence that this effect is enhanced by extra‐organizational institutions that pressure and support firms in realizing the potential benefits of higher VBM‐sophistication.

While multinational firms invest large amounts of money in employee stock ownership plans (ESOPs) to reduce turnover, there is little evidence regarding ESOPs' effectiveness in retaining rank-and-file employees and none on a global scale. Building on psychological ownership (PO) arguments, we predict that a rank-and-file employee's ESOP participation will be negatively associated with a firm exit decision and that this effect will be stronger in contextual settings that are more conducive to turnover. For our analysis, we used internal data from a large multinational firm covering 190,453 rank-and-file employees and approximately 650,000 employee years. We find that ESOP participation is associated with a lower likelihood of individual firm exit decisions. We also find this effect to be more pronounced in countries with favorable labor market conditions and lower uncertainty avoidance (UA). Additional tests support our argument that PO arising from ESOP participation is particularly important for rank-and-file employees, who often only invest small amounts. Overall, our study provides cross-country evidence regarding the retention effect of ESOP participation for rank-and-file employees.