Governance and Risk Taking in the U.S. Cable Television Industry PDF Download

Author: Thomas R. Eisenmann
Publisher:
ISBN:
Category :
Languages : en
Pages : 33

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Book Description
The relationship between governance structure and strategic risk taking behavior, measured as horizontal expansion in a turbulent environment, is explored through interviews with senior executives in eighteen cable television companies. The interviews reveal several mechanisms through which CEO equity ownership encourages risk taking behavior. First, while a failed expansion strategy may have serious personal consequences for both owner-managers (whose wealth is largely undiversified) and agent CEOs (who have reputations and hence human capital at stake), a successful strategy offers a substantially greater personal payoff for owner-managers. Second, secure in their positions by virtue of influence over their boards, owner-managers feel less obliged to justify risky expansion strategies to board members and other senior managers, and thus may gamble on intuition. By contrast, agent CEOs, who are held publicly accountable for their decisions, must marshal a persuasive case when sponsoring risky expansion strategies. Since doing so is difficult in a turbulent environment, agent CEOs may avoid such strategies. Third, owner-managers' strong emotional attachment to their companies often implies that proposals to sell their firms never receive serious consideration. Finally, outside investors2 risk preferences encourage aggressive expansion by owner-managed limited partnerships, and conservative behavior in agent-led firms owned by family trusts.