Performance Feedback and Risk Taking: The Effects of Deadline Proximity, CEO Contract, and Audience

Abstract

We contribute to the performance feedback model by developing a theoretical framework that predicts the moderating effects of evaluation deadline proximity, remaining contract duration of CEO, and audience pressure between performance feedback and risk taking behaviors. We contend that in a negative attainment discrepancy context, deadline-proximity adjusted performance-aspiration gaps will increase the risk taking propensity of CEOs and remaining contract duration of CEOs and audience pressure will intensify the effects of deadline-proximity adjusted performance-aspiration gaps on risk taking behaviors. The analysis of the Major League Baseball games from 2007 to 2016 yields the following results. First of all, deadline-proximity adjusted performance-aspiration gaps showed predicted positive effects on risk taking behaviors. Second, the remaining contract duration of CEOs intensified the positive effect of the deadline-proximity adjusted performance-social aspiration gap on risk taking behaviors. Contrary to our predictions, however, the positive effect of the deadline-proximity adjusted performance-historical aspiration gap on risk taking behaviors decreased by audience pressure.