Abstract
The paper examines the relationship between powerful CEO and firm performance using the estimation of quantile regression which models heterogeneous effects of a variable along different points of an outcome distribution. This paper targets the nonlinear and size effects of CEO power on firm performance and explores the possibility that CEO power and firm performance are endogenously determined. The results indicate that CEOs tend to possess more power in the early stage of a company's lifecycle. They acquire more ownership, expert, and prestige power following poor market returns. There is an inverted U-shaped relation between CEO ownership and accounting performance in low quantiles of firm performance distribution, while the impact on performance becomes negative in high quantiles. Moreover, the size effect shows that the positive impact of ownership decreases when firm size grows. CEOs' expert power improves firm performance, although the effect turns negative when tenure exceeds 15 years. The negative impact of expert power is more significant in small firms. Finally, CEOs' prestige power enhances firm performance in low quantiles and hurts performance in high quantiles.
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