Corporate Governance and Powerful CEOs

58 Pages Posted: 10 Jan 2018 Last revised: 23 Sep 2019

See all articles by Mark Humphery-Jenner

Mark Humphery-Jenner

UNSW Business School; Financial Research Network (FIRN)

Emdad Islam

Monash University

Lubna Rahman

University of New South Wales (UNSW), School of Banking and Finance

Jo-Ann Suchard

UNSW Business School; Financial Research Network (FIRN)

Date Written: September 16, 2019

Abstract

We examine whether improved governance helps to channel firms with powerful CEOs towards more value enhancing investment policies. We use the Sarbanes-Oxley Act and NYSE/NASDAQ listing rules as a quasi-exogenous shock and focus on firms that were required to improve governance. We find that, post-regulation, firms led by powerful CEOs increase innovation inputs (R&D expenditures) and produce more innovation outputs (patents) that are scientifically more important and economically more valuable. Investment quality also improves, manifesting in better takeover performance. Our results suggest that improved governance can mitigate value destruction in powerful CEO managed firms.

Keywords: Powerful CEOs, Sarbanes-Oxley Act (SOX), Compliant firms, Non-Compliant Firms, R&D, Innovation, Empire Building, CAPX, PPE, Dividend, Corporate Governance

JEL Classification: G31, G34

Suggested Citation

Humphery-Jenner, Mark and Islam, Md Emdadul and Rahman, Lubna and Suchard, Jo-Ann, Corporate Governance and Powerful CEOs (September 16, 2019). Available at SSRN: https://ssrn.com/abstract=3090783 or http://dx.doi.org/10.2139/ssrn.3090783

Mark Humphery-Jenner (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Md Emdadul Islam

Monash University ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Lubna Rahman

University of New South Wales (UNSW), School of Banking and Finance ( email )

Sydney
Australia

Jo-Ann Suchard

UNSW Business School ( email )

high street
High St
sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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