Performance feedback and firms’ relative strategic emphasis: The moderating effects of board independence and media coverage

This study investigates how performance feedback––the discrepancy between aspiration and actual performance––relates to firms’ relative strategic emphasis on value-creation (VC) versus value-appropriation (VA). With a sample of 7460 firm-year observations collected from 1558 publicly-listed Chinese companies during 2011–2017, we find that negative performance feedback boosts firms’ relative strategic emphasis on VC versus VA, while positive performance feedback has an inverted U-shaped effect. Explicitly, a low to medium level of positive performance feedback increases firms’ relative emphasis on VC, while a medium to high level of positive feedback decreases it. We find that two monitoring mechanisms—board independence and media coverage—moderate these influences. Specifically, board independence weakens the boosting effect of negative performance feedback and strengthens the inverted U-shaped effect of positive performance feedback; media coverage strengthens the boosting effect of negative performance feedback and weakens the inverted U-shaped effect of positive performance feedback.