Regulatory Focus and Tie Retention Afte Interlocking Firm's Bankruptcy: A Test of Regulatory Focus Theory

Jun Xia

2024年6月28日 周五 下午3：00

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Abstract:

How do board-interlocked firms react to thcir connections with bankrupt firms? Drawing on regulatory focus theory, we argue that decision makers with a promotion focus characterized by their risk-secking behavior-are more inclined to sustain ties with bankrupt firms. In contrast, decision makers with a prevention focus, characterized by their risk-averse nature, are prone to dissolve connections with bankrupt firms to avert reputational damage. We further propose the novelty, severity. and relevance of a bankruptcy event as scope conditions under which the influences of promotion and pre vention focus on interlocking retention vary. Our analysis, based on a sample of 624 public firms in the U.S.largely, supports our predictions. Our findings contribute to the bankruptcy literature by addressing the dilemma of responding to connected bankrupt firms.