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How analyst recommendation change influences strategic change: The moderating role of CEO power and board’s informal hierarchy

Journal of organizational change management, 2018-11, Vol.31 (6), p.1234-1248 [Peer Reviewed Journal]

Emerald Publishing Limited 2018 ;ISSN: 0953-4814 ;EISSN: 1758-7816 ;DOI: 10.1108/JOCM-01-2017-0019

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  • Title:
    How analyst recommendation change influences strategic change: The moderating role of CEO power and board’s informal hierarchy
  • Author: Jiang, Wan ; Wang, Linlin ; Chu, Zhaofang ; Ma, Xifang
  • Subjects: Boards of directors ; Corporate governance ; Executive compensation ; Financial leverage ; Investments ; Legitimacy ; Organizational change
  • Is Part Of: Journal of organizational change management, 2018-11, Vol.31 (6), p.1234-1248
  • Description: Purpose The purpose of this paper is to examine how analyst recommendation change is associated with a firm’s magnitude of strategic change. Design/methodology/approach This study argues that unfavorable analyst recommendation change serves as a powerful external assessment that current strategies are inappropriate and that changes are needed. This study also incorporates the moderating roles of CEO power and board’s informal hierarchy in the relationship between analyst recommendation change and firm’s magnitude of strategic change. Results from a sample of 824 observations generally support our predictions. Findings The findings of this study show that the greater the analysts downgrade for the company’s stock, the larger the magnitude of strategic change will be made. This study also considers the moderating roles of CEO power and the clarity of board’s informal hierarchy. In particular, the higher the CEO power, the weaker the relationship between analyst recommendation change and the magnitude of strategic change will be. The higher the clarity of board’s informal hierarchy, the more positive the relationship between analyst recommendation change and the magnitude of strategic change will be. Originality/value It extends research on the external predictors of strategic change by incorporating the role of unfavorable analyst recommendation change. In addition, it contributes to institutional theory by showing how external legitimacy pressure and internal corporate governance tool complement each other.
  • Publisher: Bradford: Emerald Group Publishing Limited
  • Language: English
  • Identifier: ISSN: 0953-4814
    EISSN: 1758-7816
    DOI: 10.1108/JOCM-01-2017-0019
  • Source: ProQuest One Psychology
    ProQuest Central
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