| Received wisdom has it that in the last quarter of the twentieth century, the shareholder value model of governance emerged because it was functionally superior to alternative business models. Drawing on longitudinal data of some 400 publicly traded U.S. corporations, this dissertation examines several indicators of this rising orientation of American firms to financial market players and their expectations. Taking an institutional and power-oriented approach, I argue that this transformation cannot be sufficiently explained by efficiency theories or by theories that focus on intra-organizational agents of change. Instead, I trace the shifting attention to financial markets to actors outside of firms who promoted a new theory of interests, which led executives to change strategies and structures in tandem.;Chapter 2 investigates the emergence of the new corporate role of "chief financial officer" (CFO) in American top management. In line with my contention that outside groups effected a shift in executive preferences, I find that CFOs were originally adopted for various reasons, but then became popular among all sorts of firms during the shareholder value era as hallmarks of the corporate reorientation to the interests of investors.;Chapter 3 provides direct evidence for how outside groups redefined executive interests by analyzing corporate attention to a key performance benchmark of financial markets---analysts' consensus forecasts of earnings. Firms with greater exposure to pressure from powerful groups in financial markets---securities analysts, institutional investors, and the shareholder value movement (via the explosion of stock option grants), and firms that entrenched the new CFO role into their executive structures were systematically more likely to report earnings that conformed to market expectations.;Chapter 4 examines over-time variation in dividend omission and initiation rates. Event-history analyses show that the rising popularity of the CFO model is tied to the promulgation of a new cultural ideal of how to run the large firm. Firms with CFOs were more likely to omit (less likely to initiate) a dividend. Like in the preceding two chapters, I document that executives' preferences changed in line with the perceived preferences of investors: As investors were no longer paying a premium for dividend-paying firms, executives shifted their payout policies in turn.;The dissertation concludes by suggesting that existing theories of corporate change benefit from a combined institutional and power perspective that attends to the role of outsiders in using their power to reconstruct their interests, and the interests of others. |
