Research | Shen Rui: Chief Executive Officer Effect on Corporate Cultural Change
The corporate culture embodies the core values, beliefs, and behavioral guidelines of an organization. It influences the operational methods of a company and the behavioral patterns of employees. Its transformation is also a key driver for the continuous development of the enterprise. As the top leader of a company, to what extent can the Chief Executive Officer (CEO) overcome the strong inertial forces of corporate culture, thereby changing the existing values and behavioral patterns, management style of the company?
To answer this question, Professor Shen Rui, Assistant Dean (Research) of the School of Management and Economics, The Chinese University of Hong Kong, Shenzhen along with co-authors, conducted research titled "Steering the Intangible Wheel: Chief Executive Officer Effect on Corporate Cultural Change." This study explores the impact of CEOs on corporate cultural transformation, making a significant contribution to theories in strategic leadership and corporate culture domain, and has been accepted by the top international journal Organization Science.
Author
Shen Rui
Assistant Dean (Research), Associate Professor, School of Management and Economics, CUHK-Shenzhen
Research Area
Capital Market, Corporate Finance, Financial Analyst, Information Disclosure
Abstract
We provide large-scale empirical evidence of how much chief executive officers (CEOs) change corporate culture. To do this, we use employee reviews to measure corporate cultural change in S&P 1500 firms. In a variance decomposition analysis, we find a modest effect of CEOs on corporate cultural change. The effect of CEOs on cultural change is larger than industry effect but smaller than firm effect. Regression analysis in the context of CEO succession further shows consistent evidence of a modest effect of CEO succession on corporate cultural change. In addition, the relationship between CEOs and cultural change is not likely to be fully explained by time trend, reverse causality, sample selection bias, and omitted variable bias. An investigation into the contextual contingencies of the CEO-cultural change relationship suggests that succession characteristics, such as predecessor influence and turnaround situation, weaken postsuccession cultural change, but industry task environment has a weak moderation effect. Overall, our study contributes to the literature on strategic leadership and corporate culture.
