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

63 Pages Posted: 25 Nov 2015 Last revised: 17 Feb 2019

See all articles by Daniel Urban

Daniel Urban

Erasmus University Rotterdam (EUR) - Department of Business Economics

Date Written: February 15, 2019

Abstract

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

Urban, Daniel, The Effects of Culture on CEO Power: International Evidence from Executive Turnover (February 15, 2019). Available at SSRN: https://ssrn.com/abstract=2694578 or http://dx.doi.org/10.2139/ssrn.2694578

Daniel Urban (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Business Economics ( email )

Netherlands

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