Perceived managerial discretion and firm performance: The moderating role of market competition

Xi Ping Zhao, Po-Young Chu*, Chia Yi Chen

*Corresponding author for this work

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

Despite being widely discussed in the literature, the impact of managerial discretion on firm performance remains inconclusive. In this study it is proposed that market competitiveness plays an important role in determining the influence of perceived managerial discretion on firm performance. In a survey of 169 top managers of Chinese enterprises, it was found that in highly competitive markets, perceived managerial discretion was positively related to firm performance. In contrast, where there is little competition, perceived managerial discretion and firm performance were negatively correlated. These results suggest that companies operating in highly competitive markets should permit managers greater discretion to make strategic choices to react to the dynamics of the environment. Conversely, companies in less competitive markets should limit managerial discretion to prevent managers abusing this power for personal benefits.

Original languageEnglish
Pages (from-to)145-158
Number of pages14
JournalSocial Behavior and Personality
Volume38
Issue number2
DOIs
StatePublished - 11 Mar 2010

Keywords

  • Agency theory
  • China
  • Firm performance
  • Managerial discretion
  • Market competition

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