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The Influence of German Top Executives on Corporate Policy and Firm Performance

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Marcel Normann

The question of whether strategic leaders really matter is important to a wide array of topics. Three essays contribute to empirical top executive research on the relative importance of German CEOs and CFOs. The analyses are based on a unique dataset that includes observations from more than 300 CEOs and 100 CFOs working for 110 publicly listed German firms that operated in 10 different industries between 1983 and 2002. The first essay describes and analyzes characteristics of top executives. The second essay examines the existence and size of top executive-specific effects as well as industry-, company- and executive-level moderating factors. The third essay sheds light on the circumstances under which CEOs and CFOs matter the most (or least).

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4. Essay 3: Managerial discretion of GermanCEOs and CFOs

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89 4. Essay 3: Managerial discretion of German CEOs and CFOs16 4.1 Theory Strategic leadership theorists presume that firms are reflections of their most powerful leaders (Hambrick and Mason, 1984), and considerable research has flowed from the premise that strategic leaders can influence organizational outcomes through their individual choices (e.g., Adams, Almeida, and Fer- reira, 2005; Bresser et al., 2005; Miller and Toulouse 1986). In this stream of research, upper-echelon theory has attained a particularly prominent position (Hambrick, 2007; Hambrick and Mason, 1984). According to upper-echelon theory, strategic leaders act on personal interpre- tations of the strategic situation they face, which depend on their specific know- ledge, individual experiences, values, and personalities (Cannella and Monroe, 1997). In other words, strategic leaders who face common challenges such as information overload, competing goals, and ambiguous objectives filter these stimuli through their cognitive base and form their strategic choices accor dingly (Carpenter, Geletkanycz, and Sanders, 2004).17 Upper-echelon theory further asserts that strategic leaders, through their choices, affect firm performance (Hambrick and Mason, 1984), and a foundation of newer empirical results sup- ports this assertion (Carpenter, Geletkanycz, and Sanders, 2004). Scholars con- clude that strategic leaders, including CEOs and CFOs, are of consequence to their firms (Child, 1997) and that the variance in corporate policies and firm performance crucially depends on the strategic leaders in charge. 16 Co-authors of this essay are Bjoern Six and Ruth Maria Stock (both Department of Marketing and Human Resource Management, Darmstadt University of Technology, Hochschulstrasse 1, 64289...

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