The Effects of Culture on CEO Power: International Evidence from Executive Turnover
63 Pages Posted: 25 Nov 2015 Last revised: 17 Feb 2019
Date Written: February 15, 2019
In this paper, I show that CEO power, which arises from differences in national culture, can weaken a firm's governance. Based on a hand-collected dataset with more than 5,000 forced and voluntary CEO transitions across 37 countries, I find that 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 turnover events of CEOs. Overall, the results suggest that the power and importance of CEOs vary across countries.
Keywords: Corporate governance, CEOs, turnover, culture, agency problems, managerial entrenchment
JEL Classification: G34, G38
Suggested Citation: Suggested Citation