Chief Executive Officer Power Research Articles

Strategic turnaround: unraveling the impact of CEO power on firm performance during retrenchment

Purpose This paper aims to investigate the impact of retrenchment strategy on firm performance in the context of Pakistani firms while considering the moderating role of chief executive officer (CEO) power. By examining the influence of CEO duality and CEO share ownership on the relationship, this study contributes to strategic management and corporate governance knowledge within the Pakistani business environment. Design/methodology/approach A quantitative approach was used to analyze the relationship using data from annual financial statements. The sample consisted of 76 companies from the KSE-100 index from the year 2015 to 2020. Random effects regression models were used, along with hierarchical regression to explore the moderating effect of CEO power. Findings The findings demonstrate that the implementation of a retrenchment strategy positively impacts firm performance in Pakistani firms. The study also reveals that CEO power plays a crucial role in strengthening the relationship between retrenchment strategy and firm performance. Moreover, the study highlights the importance of considering the temporal sequence, size and age of firms when examining the impact of CEO power and retrenchment strategy on firm performance. Research limitations/implications The study enhances the understanding of the contingent nature of retrenchment strategies and the influence of CEO power in the Pakistani business context. Practically, the research contributes to strategic management and corporate governance dynamics, facilitating the development of strategies that enhance firm performance and sustainability in Pakistan. Originality/value This research provides original insights by specifically focusing on the Pakistani context and analyzing the interplay between retrenchment strategy, CEO power and firm performance. The study adds to the limited literature on the relationship between retrenchment and performance in the Pakistani business environment. Additionally, it highlights the significance of CEO power as a critical factor in determining the success of retrenchment.

Unveil the benefit of independent leadership structure on employee welfare

PurposeEmployees play a vital role in the success of a corporation. While boards of directors are created to protect shareholders’ interests, it is unclear if these directors also ensure employee welfare. In this vein, our paper examines the relationship between board leadership structure and employee well-being.Design/methodology/approachThe authors employ several analysis techniques, including univariate analysis, ordinary least squares (OLS) regressions, two-stage least squares (2SLS) regressions, propensity score matching methodology, the Heckman Selection model and difference-in-differences analysis. The sample comprises USA public firms for the period 1998–2018.FindingsOur findings indicate that having an independent chairperson can significantly benefit the welfare of employees, especially for firms with overly powerful chief executive officers (CEOs) and during times of financial distress.Originality/valueIndependent leadership structure is one of the crucial board characteristics that have not been examined to explain employee welfare at firms. We find that an independent chairperson can mitigate the negative effect of overly powerful CEOs on employee benefits. Importantly, independent chairpersons are beneficial for employees in difficult times and when CEOs are busy with daily activities.

CEO cultural heritage and R&D expenditures

AbstractThis paper examines how the cultural heritage of chief executive officers (CEOs) in US firms affects research and development (R&D) investment. Utilizing economically significant and unexpected R&D‐increasing events, we examine how six dimensions of CEO cultural heritage—individualism, power distance, masculinity, uncertainty avoidance, long‐term orientation, and indulgence—influence it. We find that CEOs with a high–power distance heritage are more likely to increase R&D. We confirm that this effect of CEO power distance is robust to other cultural effects, the model specification, and endogeneity issues. We conjecture that CEOs with a high–power distance heritage are more likely to increase R&D expenditures because they use their power to pursue personal objectives. Consistent with our hypothesis, we find that R&D increases made by CEOs with a high–power distance culture generate significantly lower benefits in the future, reflecting the inefficiency of these R&D investment decisions.

Does a co‐opted director affect a firm's financial distress risk?

AbstractThis study examines the relationship between co‐opted directors (CODIR), measured as the fraction of directors appointed after the Chief Executive Officer (CEO) assumes office to board size, and firms' financial distress risk (FFDR). Understanding the relationship between CODIR and FFDR is imperative due to the significant impact of high risk‐taking on financial crises and the heightened expectations placed on board members for risk oversight. Despite growing research on corporate governance and FFDR, little attention has been paid to the role of CODIRs, presenting a significant gap in the literature. Using a US sample from 1996 to 2019, covering 13,486 firm‐year observations, we document that CODIR reduces FFDR, supporting the hypothesis that co‐opted directors have a lower financial distress risk‐taking propensity than their non‐co‐opted counterparts. We also find that a critical mass of at least three CODIRs and independent CODIRs reduces FFDR. Our results also document that CEO power in the form of CEO duality and CEO tenure, external monitoring in the form of the number of analysts following the firm, competition, and takeover susceptibility do not drive our main conclusions for co‐option and FFDR. Finally, the results show that CODIR reduces FFDR through liquidity channels. The findings remain robust to various definitions of co‐option and distress risk, and are consistent in both difference‐in‐differences analysis and propensity score matching.

Green finance when stakeholders’ interests collide with each other: the case of Bangladesh

PurposeThis study examines the impact of chief executive officer (CEO) power, institutional investors and their interaction on green financing provided by Bangladeshi financial institutions and the moderating effect of government policy and CEO political connections on these relations.Design/methodology/approachWe employ ordinary least squares (OLS) regressions and interaction terms among variables of interest for the empirical analysis.FindingsGreen financing decreases with CEO power, implying that CEOs of this country’s financial institutions are averse to green loans, whereas institutional investors increase green financing extended by these institutions. The government policy, which includes financial incentives for complying financial institutions, strengthens institutional investors' positive impact on green financing, but it does not change CEOs' aversion to green loans. Institutional investors have a positive moderating effect on the relationship between green finance (GF) and CEO power, but this positive moderating effect is negated in banks where the government owns a stake, possibly because CEOs of state-owned financial institutions are politically connected, which reduces institutional investors’ influence over them.Originality/valueThis study is unique in that it is the first to examine how the interaction among different stakeholders affects green financing in a unique setting. As the literature is almost silent on this topic, the findings of this paper are expected to raise policymakers’ awareness of the obstacles that hamper the efforts of developing countries to go green.

What Effect Does CEO Power Has over Integrated Reporting? Evidence from Indonesian Listed Companies

This study aims to analyze the role to chief executive officer (CEO) in integrated reporting (IR) adoption and whether growth opportunities moderate this role. This study is based on an unbalanced data panel of 106 firms listed on Indonesian Stock Exchange from  2017 to 2021 (530 observations). Using a panel regression model this study found that CEO power does not affect IR, and growth opportunities do not modify the relationship. Furthermore, this study also revealed that there is only one company sample that published IR based on the  International Integrated Reporting Council (IIRC) framework in 2021. It is suggested that policy makers need to encourage IR adoption trough regulation and incentives.

Navigating uncharted skies: The role of pilot CEO in FinTech adoption

Employing the pilot credentials of chief executive officers (CEOs) as a proxy of the proclivity for venturing into uncharted territories and pursuing novel experiences, this study finds that pilot CEOs are associated with higher intensity of FinTech adoption. This positive association is more pronounced in firms with a powerful CEO and less significant in financially constrained firms, suggesting that the impact of pilot CEOs on FinTech adoption is affected by the CEO's power and the firm's access to external financial resources. Overall, our evidence advances the understanding of the role of CEO characteristics in driving FinTech adoption.

What’s in It for Me? CEOs’ Rent-Seeking Motivations and Corporate Social Responsibility Decisions

ABSTRACT Prior research has argued that companies in transition economies engage in corporate social responsibility (CSR) activities to achieve political goals, such as building connections with the government. However, it is unclear why chief executive officers (CEOs) agree to make these politically driven CSR decisions that mainly benefit the controlling shareholders. We show that controlling shareholders may “bribe” the CEOs with greater compensation or perks—a form of economic rents extracted by the CEOs—to make CSR decisions, and such a pattern is more salient in local government-owned companies. We reason that these CSR activities reflect implicit contracting between the controlling shareholders and the CEOs. Through cross-section analyses, we find that the CEO’s economic rents vary with local government fiscal needs, the firm’s governance structure, and CEO power. Furthermore, we demonstrate that increases in CSR-linked compensation lead to a decline in shareholder value. Data Availability: All data are available from public databases identified in the paper. JEL Classifications: D72; M12; P26.

CEO power and stock price crash risk in India: the moderating effect of insider trades

PurposeThis study aims to explore the relationship between chief executive officer (CEO) power and stock price crash risk in India. Furthermore, it seeks to analyse how insider trades may moderate the impact of CEO power on stock price crash risk.Design/methodology/approachA study of 236 companies from the S&P BSE 500 Index (2014–2023) have been analysed through pooled ordinary least square (OLS) regression in the baseline analysis. To enhance the results' reliability, robustness checks include alternative methodologies, such as panel data regression with fixed-effects, binary logistic regression and Bayesian regression. Additional control variables and alternative crash risk measure have also been utilised. To address potential endogeneity, instrumental variable techniques such as two-stage least squares (IV-2SLS) and difference-in-difference (DiD) methodologies are utilised.FindingsStakeholder theory is supported by results revealing that CEO power proxies like CEO duality, status and directorship reduce one-year ahead stock price crash risk and vice versa. Insider trades are found to moderate the link between select dimensions of CEO power and stock price crash risk. These findings persist after addressing potential endogeneity concerns, and the results remain consistent across alternative methodologies and variable inclusions.Originality/valueThis study significantly advances research on stock price crash risk, especially in emerging economies like India. The implications of these findings are crucial for investors aiming to mitigate crash risk, for corporations seeking enhanced governance measures and for policymakers considering the economic and welfare consequences associated with this phenomenon.

The face of morality: Powerful Chief Executive Officers’ (CEOs’) facial characteristics and moral foundations.

The face of morality: Powerful Chief Executive Officers’ (CEOs’) facial characteristics and moral foundations.

Do Powerful CEOs Benefit Firm Performance in Pakistan?

Manuscript type: Research paper Research aims: This study examines the impact of Chief Executive Officer (CEO) power dimensions on firm performance. Design/Methodology/Approach: A panel data of 110 Pakistani firms listed on the Pakistan Stock Exchange for the period of 12 years (2008- 2019) was analysed using the GMM approach. Research findings: The GMM regression results revealed significant relationships. The analysis suggests that CEOs with considerable structural, ownership, prestige, and expert power tend to exhibit superior performance, as these factors are positively correlated with firm performance. Conversely, CEO family power appears to have no discernible impact on firm performance. Importantly, the robustness of our findings underscores the consistent nature of these relationships. Theoretical contribution/Originality: This study makes a valuable contribution to the existing literature by demonstrating the positive influence of CEO power on firm performance, which aligns with the theoretical framework of the Approach/Inhibition theory of power. The originality of this research stems from its examination of individual dimensions of CEO power and their impact on firm performance, as well as the inclusion of the additional dimension of family power. Practitioner/Policy implication: The insight from this study suggests that powerful CEO leadership is beneficial for firm performance and the concentration of power at the CEO position should be seen positively rather than the negative perspective provided by agency theory.

CEO power and corporate strategies: a review of the literature

In recent years, the impact of chief executive officers (CEOs) power on corporate strategies has attracted significant public debate in the academic milieu. In this study, we comprehensively review the academic literature on CEO power in relation to different corporate policies. We conduct a comprehensive review by dividing the literature into four streams: CEO power and firm performance, CEO power and executive compensation, CEO power and firm risk-taking, and finally, CEO power on other corporate strategies. Our review shows that the findings are mixed in relation to the effects of CEO power on firm strategies. Overall, the negative impact of CEO power on firm performance is attributed to agency theory, where CEOs pursue their own vested interests, thereby leading to weak corporate governance. The review reveals that the positive impact of CEO power on corporate outcomes is due to effective board monitoring, a powerful board, and high market competition. Our study also shows that most of the studies have adopted Finkelstein’s (1992) four sources of CEO power but have taken different proxies to measure these powers. We have also identified several gaps in the current studies and recommend avenues for further research.

Disruptive Innovation (DI) and Chief Executive Officer(CEO): A synthetic literature review

Objective: This paper reviews the findings of empirical studies linking disruptive innovations directly or indirectly to CEOs for the period 2019-2023. It also explores disruptive innovation and the fuzzy concepts of CEO and CEO power and proposes future research directions. Research Design & Methods: Research methods are based on comprehensive literature reviews. In a three-step process, relevant papers are identified and categorized. These samples are then analyzed and brought into perspective to explain the concept of disruptive innovation and CEO, based on which recommendations for future research are made. Findings: Although many studies imply a correlation between disruptive innovation and CEOs, there are no empirical studies specifically addressing this link. The main reason seems to be a lack of clarity about the concept of "CEO" itself. Contribution & Value Added: This study introduces the concept of disruptive innovation based on the study of existing literature. Furthermore, it is an excellent starting point for scholars interested in clarifying disruptive innovation or preventing the discovery of the nature of the relationship between disruptive innovation and the CEO.

Effects of CEO water shortage experience and power intensity on corporate water performance - Evidence from China

Corporate water performance and sustainable development are currently vital focus areas for scholars. Therefore, this paper investigates the experience of Chief Executive Officers (CEOs) with water shortage influences corporate water performance by focusing on listed companies in water-intensive and high-water-risk industries in China between 2014 and 2019. This paper manually collected information relative to the cities and provinces where CEOs grew up to evaluate their early exposure to water shortages. Furthermore, this paper develops an evaluation scale, based on the Enterprise Water Conservation Evaluation Guide (GB/T 7119-2006), to compute the enterprise water management practices scores. These results will constitute the enterprise water performance evaluation score. Moreover, this paper focuses on CEOs who have experienced water resource shortages through a positive impact on the water resource performance of their companies. As for the findings, they demonstrate that CEOs who grew up in regions with higher water scarcity have a more pronounced positive effect on their water shortage experience through corporate water performance. Furthermore, CEO power intensity positively moderates the relationship between the CEO's water shortage experience and corporate water resource performance. Further investigation reveals generational differences in the impact of CEO water shortage experience on company water performance. CEOs, who grew up during periods with a higher incidence of droughts, demonstrate a more significant promoting effect on corporate water performance. To sum up, this study expands the understanding of factors influencing corporate water resource performance and deepens the knowledge of the early life experiences of CEOs.

Exploring the Impact of Ownership Structure and CEO Power on CSR and Firm Performance in Pakistan: A Comparative Study of Pre, Post and Covid Era as an Emerging Economy

The primary purpose of this research is to acquire a profound comprehension of the impacts of Corporate Social Responsibility (CSR) on the operations of firms and on society as a whole, with Pakistan serving as the focal point of the research. This study's objective is to determine whether or not there is a moderating effect of CEO power on the relationships that exist between CSR, ownership concentration, and efficient business practices. In-depth research has been conducted on fifty different non-financial enterprises in Pakistan to see how well they performed before, during, and after the Covid-19 Pandemic. On the data that has been gathered, descriptive statistics and regression analysis have been carried out with the assistance of SPSS. The research found that in the middle of the Covid-19 outbreak in Pakistan, the degree of authority held by CEOs had a major impact on the dynamics of the economy. The authority of the Chief Executive Officer (CEO) has a significant impact on the relationship between corporate social responsibility (CSR) and the performance of an organization. Even in a developing country like Pakistan, the present study highlights the importance of corporate social responsibility (CSR) and the positive influence it may have on the bottom line of a firm. The purpose of this study is to investigate the beneficial benefits that corporate social responsibility (CSR) has on society, with a particular emphasis on emerging countries such as Pakistan. This research serves as a useful guide by emphasising how important CSR is for linking together the success of businesses and the well-being of the society in which they operate.

Exploring the Impact of Ownership Structure and CEO Power on CSR and Firm Performance in Pakistan: A Comparative Study of Pre, Post and Covid Era as an Emerging Economy

The primary purpose of this research is to acquire a profound comprehension of the impacts of Corporate Social Responsibility (CSR) on the operations of firms and on society as a whole, with Pakistan serving as the focal point of the research. This study's objective is to determine whether or not there is a moderating effect of CEO power on the relationships that exist between CSR, ownership concentration, and efficient business practices. In-depth research has been conducted on fifty different non-financial enterprises in Pakistan to see how well they performed before, during, and after the Covid-19 Pandemic. On the data that has been gathered, descriptive statistics and regression analysis have been carried out with the assistance of SPSS. The research found that in the middle of the Covid-19 outbreak in Pakistan, the degree of authority held by CEOs had a major impact on the dynamics of the economy. The authority of the Chief Executive Officer (CEO) has a significant impact on the relationship between corporate social responsibility (CSR) and the performance of an organization. Even in a developing country like Pakistan, the present study highlights the importance of corporate social responsibility (CSR) and the positive influence it may have on the bottom line of a firm. The purpose of this study is to investigate the beneficial benefits that corporate social responsibility (CSR) has on society, with a particular emphasis on emerging countries such as Pakistan. This research serves as a useful guide by emphasising how important CSR is for linking together the success of businesses and the well-being of the society in which they operate.

The impact of CEO power on corporate tax avoidance: the moderating role of institutional ownership

Purpose This study aims to investigate the relationship between chief executive officer (CEO) power and the level of tax avoidance of Tunisian listed companies. It also examines the moderating role of institutional ownership in this association. Design/methodology/approach The sample comprises 306 firm-year observations of companies listed on the Tunis Stock Exchange during the 2013–2020 period. Findings The results indicate that CEO power reduces tax avoidance levels. Moreover, the relationship between CEO power and tax avoidance is more pronounced in the presence of institutional ownership, suggesting that CEOs act less opportunistically when monitored by institutional investors, which results in a reduction in tax avoidance. Practical implications This study suggests that CEO power and institutional shareholders’ influence are important factors in determining firms’ avoidance behavior. This study has significant implications for shareholders and regulatory bodies. Indeed, shareholders apprehend the impact of appointing a powerful CEO on tax avoidance practices. This study may also provide regulators with new insights into the influence of CEO power dimensions and institutional ownership on tax aggressiveness. Originality/value This study fills the gap in the accounting literature by investigating how CEO power may impact tax avoidance behavior and provides empirical evidence on the moderating impact of institutional ownership on this relationship in an emerging economy context characterized by a weakly protected investor setting.

Luxury Goods as a Determinant of the Status of Top Managers – Perspective of the Young Generation with a High Power Distance

The future of business and its further development rests in the hands of the young generation, the people who will soon perform various roles in companies that are part of the business. The article presents the results of the study with the following three objectives: to explain young people's distance to the power exercised by the Chief Executive Officer (CEO); to discover the young generation’s views on the CEO displaying their high status (high position) in the company in terms of power distance; to check whether there is any correlation between the belief in the CEO exceptionality and the acceptance of luxurious determinants of the CEO status.
 The study, aimed at clarifying the above issues, was carried out on a group of 773 participants. According to the survey, 16.7% of survey respondents recognized the CEO as an exceptional person, 41.9% would feel intimidated when dealing with them, and 49.1% would obey the CEO and follow their instructions without questioning. People with such attitudes and views are characterized by a medium and large distance from the CEO power. The survey revealed that, among the younger generation, there are more opposing opinions than accepting the CEO displaying their status using luxury goods. The authors showed that there is no link between recognizing the CEO as a special person who deserves being admired and imitated (high power distance), and the belief that the CEO should demonstrate their high status using luxury goods.

The trilogy between CEO overpower, green credit, and core competence: Evidence from commercial banks in Vietnam

This paper investigates the interconnection between Chief Executive Officer (CEO) power, green credit, and core competence of commercial banks in Vietnam. Our data sample consists of 373 annual observations from 2010 to 2021. We employ a dynamic system Generalized Method of Moments to analyze an unbalanced panel comprised of 373 annual observations from 2010 to 2021. The findings indicate an inverse U-shape relationship between CEO overpower and commercial banks' core competence. Moreover, the study reports that banks with green lending activities reduce core competence by about 0.1598 points more than other banks. In addition, the results indicate that CEO power moderates the relationship between green credit and core competence. Our findings align with stewardship, management entrenchment, first-mover advantage, stakeholder theories, and prior literature. The study has practical implications for policymakers to develop the banking system sustainably in emerging markets.

Military CEOs and firm dividends and cash holdings

PurposeThe purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions.Design/methodology/approachThe authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects.FindingsThe results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility.Originality/valueOverall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts.