Twisting the hand that feeds you: Power contestation between firms and their Institutional environment

This dissertation integrates agency and institutional theories to bring power and agency into the institutional literature. It investigates the efficacy of the regulatory environment (regulation creation and regulation enforcement) in constraining managerial self-interest (CEO excess returns). Further, this study examines the regulatory environment as an antecedent to firm manipulation tactics (political contributions and firm-regulator networks) to offer insight into power contestation during institutionalization processes. Although a number of studies have sought to explain the nature of managerial self-interest, this study takes a different approach by suggesting the regulatory environment is an important determinant of excess CEO compensation. Outcomes of these manipulations are further explored to determine if the tactics deployed by corporate elites grant them greater discretion and control over the organization and thereby allow them to extract disproportionate value from the organization's shareholders.;I tested the hypotheses using a sample of firms from the investment banking industry from 1992 to 2010. Results reveal that certain sources of regulatory pressure, namely legislative control, congressional liberalism, and regulatory culture are negatively associated with CEO excess returns. I also find a positive relationship between aspects of the regulatory environment and firm manipulation tactics, suggesting firms are indeed actively engaging in the institutionalization process. I did not, however, find a significant relationship between either firm lobbying contributions or firm-regulator networks and CEO excess returns. The dissertation concludes with a discussion of theoretical and practical implications.