CEO Regulatory Focus, Analysts’ Optimism Bias, and Firm Strategic Change: Evidence From Chinese-Listed Companies

With the ongoing coronavirus disease 2019 (COVID-19) pandemic, technological, socio-political, and institutional changes have led to a “new normal” competitive landscape, firms must make longer-term strategic changes to deal with short-term discontinuities and great uncertainties to acquire sustainable advantage. Based on regulatory focus theory and upper echelons theory, this study explores the relationship between CEO regulatory focus and corporate strategic change and examines the moderating effects of analysts’ optimism bias in earning forecasts. The study uses data from A-share-listed companies in China during 2010–2018. We find that CEO promotion focus is positively associated with strategic change, while CEO prevention focus is negatively associated with strategic change. We also find analysts’ optimism bias in earning forecasts would moderate these relationships.