We examine the relationship between agent (CEO) risk bearing and the quality of executive risk-taking outcomes, by examining the contingency effect of CEO perceived firm efficacy. In doing so, we extend the behavioral agency model (BAM) beyond predictions of risk magnitude to examining how CEO risk-taking outcomes differ qualitatively in response to risk bearing. We argue that CEO risk bearing (due to stock options or cash compensation) will positively influence performance outcomes in the presence of higher perceived firm efficacy. However, this positive influence reverses when efficacy is lower. We demonstrate the utility of firm efficacy in exploring the effect of agent risk bearing on performance outcomes and provide the insight that the CEO pay-performance relationship is influenced by the CEO's perception of firm efficacy.
- Behavioral agency
- Perceived firm efficacy
ASJC Scopus subject areas
- Applied Psychology
- Strategy and Management
- Organizational Behavior and Human Resource Management
- Management of Technology and Innovation