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Promote or prevent? A regulatory focus perspective on managerial risk taking
Amadeusz Jacek Miązek1, Justyna Światowiec-Szczepańska2
1Department of Management Accounting, Poznań University of Economics and Business, Poznań, Poland.
Plos One
|July 31, 2026
Summary
CEO risk-taking depends on their focus and pay. Promotion-focused CEOs take more risks, while prevention-focused CEOs are cautious. Compensation structure significantly influences these strategic decisions.
Area of Science:
- Corporate Governance
- Behavioral Economics
- Strategic Management
Background:
- CEO risk attitudes are heterogeneous and influence strategic decision-making.
- Regulatory Focus Theory (RFT) provides a framework for understanding motivational drivers.
- Executive compensation structures can moderate CEO risk-taking behavior.
Purpose of the Study:
- To examine how CEOs' promotion and prevention focus influence strategic risk-taking.
- To investigate the moderating role of fixed versus variable compensation components on CEO risk-taking.
- To provide insights for optimizing corporate governance and executive compensation strategies.
Main Methods:
- Content analysis of shareholder letters using a validated Polish Linguistic Inquiry and Word Count (LIWC) dictionary to assess CEO regulatory focus.
- Longitudinal panel data analysis of 82 companies listed on the Warsaw Stock Exchange (WSE) from 2011 to 2020.
- Development and testing of a conceptual model with six hypotheses based on RFT and management frameworks.
Main Results:
- CEO regulatory focus significantly predicts strategic risk-taking: promotion-focused CEOs increase risk, while prevention-focused CEOs mitigate risk.
- Fixed compensation is associated with reduced strategic risk, reinforcing risk aversion, especially for prevention-focused CEOs.
- Annual bonuses amplify risk-taking for promotion-focused CEOs, suggesting intrinsic motivation can override extrinsic incentives for risk moderation.
Conclusions:
- Tailoring executive compensation to individual CEO risk preferences is crucial for effective corporate governance.
- Fixed salaries can temper excessive risk-taking in promotion-focused CEOs.
- Performance-based bonuses can motivate cautious, prevention-focused CEOs to pursue strategic risks, aligning behavior with shareholder interests.
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