CEO organizational identification and corporate innovation investment

Identity theory in economics reveals that organisational identification motivates managers to take actions that are strongly aligned with firm interests. Nevertheless, organisational identification may also play a role in personal incentives. Leveraging the availability of CEO organisational identif...

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Bibliographic Details
Published in:Accounting and finance (Parkville) 2022-09, Vol.62 (3), p.4185-4217
Main Authors: Du, Dongying, Tang, Xiaojian, Wang, Huaiming, Zhang, Joseph H., Tsui, Stephanie, Lin, Dongjie
Format: Article
Language:English
Subjects:
Business growth
CEO organisational identification
Chief executive officers
Corporate identity
Corporate innovation
Economic theory
Firm valuation
Innovations
Stock ownership
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Summary:Identity theory in economics reveals that organisational identification motivates managers to take actions that are strongly aligned with firm interests. Nevertheless, organisational identification may also play a role in personal incentives. Leveraging the availability of CEO organisational identification data from the national internal control survey of listed firms in China, we document a positive impact of CEO organisational identification on corporate innovation. We also find that the positive impact is more pronounced for firms whose CEOs own shares, that are followed by more financial analysts, and that have higher institutional ownership. Additional analyses suggest that the interaction between CEO organisational identification and corporate innovation investment significantly enhances firm value. Overall, our study shows that CEO organisational identification is a non‐trivial driver of firm innovation and growth.
ISSN:0810-5391
1467-629X
DOI:10.1111/acfi.12920