The Effects of Culture on CEO Power: International Evidence from Executive Turnover

Abstract

Based on a hand-collected dataset with more than 5,000 forced and voluntary CEO transitions across 37 countries, I find that the importance and power of CEOs differ from country to country. CEOs are less likely to be dismissed for bad performance in more hierarchical countries. The results are robust to alternative measures of hierarchy, a large battery of control variables, subsample analysis, placebo tests, and different empirical methodologies. Stronger hierarchies also allow for idiosyncratic managerial styles around exogenous turnovers of CEOs. This is in contrast to existing literature on CEOs in the U.S., where hierarchies are relatively flat.

Keywords: Corporate governance, CEOs, turnover, culture, agency problems, managerial entrenchment

JEL Classification: G34, G38