Powerful CEOs and their Impact on Corporate Performance
University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)
Renee B. Adams
University of New South Wales; Financial Research Network (FIRN); European Corporate Governance Institute (ECGI)
London School of Economics & Political Science (LSE) - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)
September 10, 2003
AFA 2004 San Diego Meetings; EFA 2002 Berlin Meetings Discussion Paper
Executives can only impact firm outcomes if they have influence over crucial decisions. Based on this idea we develop and test the hypothesis that firms whose CEOs have more decision-making power should experience more variability in performance. We construct proxies for the CEO's power to influence decisions and show that stock returns are significantly more variable for firms run by powerful CEOs. We find similar results using alternative measures of performance. These findings suggest that the interaction between executive characteristics and organizational variables may have important consequences for firm performance.
Number of Pages in PDF File: 36
JEL Classification: G34, G12
Date posted: November 11, 2003
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