Does CEO Power Backfire? The Impact of CEO Power on Corporate Strategic Change
Abstract
:1. Introduction
2. Theoretical Background and Hypothesis Development
2.1. CEO Power and Corporate Strategic Change
2.1.1. The Approach–Inhibition Theory of Power
2.1.2. The Effect of CEO Power on Corporate Strategic Change
2.2. The Moderating Role of Underperformance
2.3. The Moderating Role of Product Market Competition
3. Methods
3.1. Sample and Dataset
3.2. Model Specification
4. Results
4.1. Descriptive Analysis
4.2. Empirical Results
4.3. Robust Test
5. Discussion and Conclusions
5.1. Theoretical Contributions
5.2. Managerial Implications
5.3. Limitations and Directions for Future Research
5.4. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Dimensions of CEO Power | Symbols of Indicators | Interpretation of Indicators |
---|---|---|
Structural power | Duality | Whether or not to serve concurrently as chairman, if 1, not 0. |
Insider director | Whether to serve as an internal director concurrently or not, if 1, not 0. | |
Owner power | CEO share | Whether the CEO holds the shares of the company or not, if 1, not 0. |
Top1 | Whether the proportion of major shareholders is lower than the median of annual industry sample companies or not, if 1, not 0. | |
Expert power | Senior rank | Whether the CEO has a senior title or not, if 1, not 0. |
Tenure | Whether the number of working days exceeds the median number of companies in the annual industry sample, if 1, not 0. | |
Reputation power | Education | Whether higher education background is above a master degree, if 1, not 0. |
Part-time | Whether to take part-time jobs outside the enterprise, if 1, not 0. |
Variable | Mean | Median | SD | Min | Max |
---|---|---|---|---|---|
Change | −0.002 | −0.089 | 0.361 | −0.433 | 13.38 |
CEOpower | 0.556 | 0.500 | 0.186 | 0 | 1 |
Comp | 0.527 | 0.557 | 0.208 | 0 | 0.875 |
HI | 0.035 | 0.019 | 0.049 | 0 | 0.272 |
Board | 8.859 | 9 | 1.778 | 5 | 15 |
Growth | 0.425 | 0.137 | 1.281 | −0.782 | 11.29 |
H10 | 0.177 | 0.151 | 0.118 | 0.015 | 0.572 |
Indep | 0.370 | 0.333 | 0.053 | 0.286 | 0.571 |
Leverage | 0.227 | 0.191 | 0.169 | 0.002 | 0.746 |
Life | 11.48 | 12 | 5.594 | 0 | 37 |
Roa | 0.033 | 0.035 | 0.062 | −0.239 | 0.208 |
Sale | 0.196 | 0.155 | 0.159 | 0.023 | 1.155 |
Size | 21.79 | 21.609 | 1.302 | 19.05 | 25.74 |
Slack | 0.961 | 0.328 | 1.774 | 0.002 | 10.22 |
Soe | 0.388 | 0 | 0.487 | 0 | 1 |
Change | CEOpower | COMP | HI | Board | Growth | H10 | INDEP | Leverage | Life | ROA | Sale | Size | Slack | SOE | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Change | 1 | ||||||||||||||
CEOpower | −0.014 | 1 | |||||||||||||
COMP | 0.005 | 0.075 * | 1 | ||||||||||||
HI | 0.196 * | −0.057 * | −0.011 | 1 | |||||||||||
Board | −0.064 * | −0.015 | −0.070 * | −0.070 * | 1 | ||||||||||
Growth | 0.057 * | −0.067 * | 0.012 | 0.012 | −0.042 * | 1 | |||||||||
H10 | −0.041 * | −0.259 * | −0.121 * | −0.058 * | 0.035 * | 0.009 | 1 | ||||||||
INDEP | 0.031 * | 0.011 | 0.004 | 0.020 | −0.427 * | 0.034 * | 0.055 * | 1 | |||||||
Leverage | −0.016 | −0.087 * | −0.084 * | 0.063 * | 0.178 * | −0.183 * | 0.066 * | −0.067 * | 1 | ||||||
Life | −0.065 * | −0.007 | 0.104 * | −0.014 | 0.007 | 0.037 * | −0.129 * | −0.029 * | 0.002 | 1 | |||||
ROA | −0.118 * | 0.134 * | 0.043 * | −0.628 * | 0.001 | −0.018 * | 0.162 * | −0.014 | −0.193 * | −0.092 * | 1 | ||||
Sale | 0.093 * | 0.006 | 0.116 * | 0.291 * | −0.093 * | 0.066 * | −0.170 * | 0.046 * | −0.065 * | 0.076 * | −0.252 * | 1 | |||
Size | −0.158 * | −0.064 * | −0.104 * | −0.246 * | 0.278 * | 0.022 * | 0.237 * | 0.022 * | 0.088 * | 0.131 * | −0.008 | −0.249 * | 1 | ||
Slack | 0.072 * | 0.120 * | 0.041 * | −0.003 | −0.107 * | −0.028 * | 0.009 | 0.021 * | −0.246 * | −0.146 * | 0.253 * | 0.074 * | −0.282 * | 1 | |
SOE | −0.083 * | −0.215 * | −0.110 * | −0.052 * | 0.302 * | 0.006 | 0.174 * | −0.083 * | 0.256 * | −0.003 | −0.175 * | −0.131 * | 0.355 * | −0.210 * | 1 |
Explanatory Variables | Dependent Variable: Corporate Strategic Change | |||||
---|---|---|---|---|---|---|
Control Variables | Main Effect | Low Underperformance | High Underperformance | Low Product Market Competition | High Product Market Competition | |
Model (1) | Model (2) | Model (3) | Model (4) | Model (5) | Model (6) | |
CEOpoweri,t-1 | 0.110 *** | 0.149 *** | 0.006 | 0.002 | 0.233 *** | |
(0.040) | (0.057) | (0.059) | (0.062) | (0.072) | ||
CEOpoweri,t-12 | −0.079 ** | −0.107 ** | 0.030 | 0.035 | −0.179 *** | |
(0.034) | (0.046) | (0.052) | (0.052) | (0.059) | ||
Boardi,t-1 | 0.003 *** | 0.004 *** | 0.016 | 0.050 ** | 0.128 *** | −0.003 |
(0.001) | (0.001) | (0.013) | (0.020) | (0.019) | (0.019) | |
Growthi,t-1 | 0.007 *** | 0.008 *** | 0.004 | 0.194 *** | 0.036 | 0.146 *** |
(0.001) | (0.001) | (0.040) | (0.049) | (0.049) | (0.049) | |
H10i,t-1 | 0.056 *** | 0.082 *** | −0.014 | −0.098 *** | −0.0005 | −0.131 *** |
(0.011) | (0.013) | (0.014) | (0.019) | (0.016) | (0.019) | |
INDEPi,t-1 | 0.107 *** | 0.142 *** | −0.001 *** | −0.003 *** | 0.001 | −0.002 *** |
(0.033) | (0.031) | (0.0004) | (0.001) | (0.0004) | (0.0005) | |
Leveragei,t-1 | −0.039 *** | −0.043 *** | −0.600 *** | −0.570 *** | −0.683 *** | −0.467 *** |
(0.011) | (0.012) | (0.045) | (0.060) | (0.055) | (0.059) | |
Lifei,t-1 | −0.001 *** | −0.001 *** | −0.026 *** | −0.044 *** | 0.075 *** | −0.054 *** |
(0.0002) | (0.0002) | (0.002) | (0.002) | (0.0213) | (0.019) | |
ROAi,t-1 | −0.528 *** | −0.588 *** | 0.0001 | −0.072 *** | −0.031 *** | −0.035 *** |
(0.031) | (0.033) | (0.022) | (0.019) | (0.002) | (0.002) | |
Sizei,t-1 | −0.025 ** | −0.038 *** | 0.019 *** | 0.013 *** | 0.018 *** | 0.017 *** |
(0.011) | (0.013) | (0.001) | (0.001) | (0.002) | (0.001) | |
Salei,t-1 | −0.033 *** | −0.035 *** | −0.013 *** | 0.003 | −0.022 *** | −0.014 ** |
(0.001) | (0.001) | (0.004) | (0.007) | (0.006) | (0.006) | |
Slacki,t-1 | 0.015 *** | 0.017 *** | 0.149 *** | 0.006 | 0.002 | 0.233 *** |
(0.001) | (0.001) | (0.057) | (0.059) | (0.062) | (0.072) | |
SOEi,t-1 | −0.017 *** | −0.016 *** | −0.107 ** | 0.030 | 0.035 | −0.179 *** |
(0.004) | (0.003) | (0.046) | (0.052) | (0.052) | (0.059) | |
Year Dummy | Yes | Yes | Yes | Yes | Yes | Yes |
Industry Dummy | Yes | Yes | Yes | Yes | Yes | Yes |
P-value of the inter-group coefficient difference | 0.001 | 0.034 |
Explanatory Variables | Dependent Variable: Corporate Strategic Change | |||||
---|---|---|---|---|---|---|
Control Variables | Main Effect | Low Underperformance | High Underperformance | Low Product Market Competition | High Product Market Competition | |
Model (1) | Model (2) | Model (3) | Model (4) | Model (5) | Model (6) | |
CEOpoweri,t-1 | 0.259 *** | 0.214 *** | 0.183 *** | 0.008 | 0.183 *** | |
(0.024) | (0.041) | (0.038) | (0.040) | (0.038) | ||
CEOpoweri,t-12 | −0.206 *** | −0.179 *** | −0.167 *** | 0.023 | −0.167 *** | |
(0.020) | (0.034) | (0.031) | (0.036) | (0.031) | ||
Boardi,t-1 | 0.01 | 0.001 ** | 0.001 | −0.002 | −0.001 | −0.002 |
(0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
Growthi,t-1 | 0.006 *** | 0.006 *** | 0.003 * | 0.007 *** | 0.003 | 0.007 *** |
(0.001) | (0.001) | (0.002) | (0.002) | (0.002) | (0.002) | |
H10i,t-1 | 0.065 *** | 0.058 *** | 0.050 *** | 0.020 | 0.093 *** | 0.020 |
(0.009) | (0.009) | (0.015) | (0.015) | (0.016) | (0.015) | |
INDEPi,t-1 | −0.005 | 0.031 ** | −0.074 ** | 0.020 | −0.147 *** | 0.020 |
(0.015) | (0.015) | (0.033) | (0.036) | (0.037) | (0.036) | |
Leveragei,t-1 | −0.001 | 0.018 ** | −0.023 ** | 0.007 | −0.005 | 0.007 |
(0.007) | (0.008) | (0.010) | (0.014) | (0.011) | (0.014) | |
Lifei,t-1 | −0.0003 * | −0.001 *** | 0.0007 ** | −0.002 *** | −0.0005 | −0.002 *** |
(0.0002) | (0.0002) | (0.0003) | (0.001) | (0.0004) | (0.0003) | |
ROAi,t-1 | −0.088 *** | −0.117 *** | −0.107 ** | 0.141 *** | −0.359 *** | 0.141 *** |
(0.025) | (0.022) | (0.049) | (0.044) | (0.045) | (0.044) | |
Sizei,t-1 | −0.004 | −0.002 | −0.013 *** | 0.029 ** | −0.008 | 0.029 ** |
(0.008) | (0.005) | (0.001) | (0.012) | (0.014) | (0.012) | |
Salei,t-1 | −0.023 *** | −0.023 *** | −0.082 *** | −0.030 *** | −0.014 *** | −0.030 *** |
(0.001) | (0.001) | (0.016) | (0.001) | (0.002) | (0.001) | |
Slacki,t-1 | 0.008 *** | 0.009 *** | 0.006 *** | 0.003 *** | 0.019 *** | 0.003 *** |
(0.001) | (0.001) | (0.001) | (0.001) | (0.002) | (0.001) | |
SOEi,t-1 | −0.021 *** | −0.014 *** | −0.031 *** | −0.019 *** | −0.009 ** | −0.019 *** |
(0.003) | (0.002) | (0.003) | (0.004) | (0.004) | (0.004) | |
Year Dummy | Yes | Yes | Yes | Yes | Yes | Yes |
Industry Dummy | Yes | Yes | Yes | Yes | Yes | Yes |
P-value of the inter-group coefficient difference | 0.001 | 0.045 |
Explanatory Variables | Dependent Variable: Corporate Strategic Change | |||||
---|---|---|---|---|---|---|
Control Variables | Main Effect | Low Underperformance | High Underperformance | Low Product Market Competition | High Product Market Competition | |
Model (1) | Model (2) | Model (3) | Model (4) | Model (5) | Model (6) | |
CEOpoweri,t-1 | 0.168 *** | 0.088 ** | 0.043 | 0.022 | 0.241 *** | |
(0.032) | (0.045) | (0.049) | (0.043) | (0.068) | ||
CEOpoweri,t-12 | −0.116 *** | −0.0684 * | −0.013 | 0.014 | −0.184 *** | |
(0.026) | (0.038) | (0.042) | (0.034) | (0.057) | ||
Boardi,t-1 | 0.003 *** | 0.005 *** | 0.003 *** | 0.004 *** | 0.006 *** | −0.001 |
(0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
Growthi,t-1 | 0.006 *** | 0.007 *** | 0.005 *** | 0.010 *** | 0.0002 | 0.003 |
(0.001) | (0.001) | (0.002) | (0.003) | (0.003) | (0.003) | |
H10i,t-1 | 0.029 *** | 0.067 *** | 0.021 ** | 0.034 * | 0.104 *** | 0.012 |
(0.011) | (0.010) | (0.010) | (0.018) | (0.014) | (0.022) | |
INDEPi,t-1 | 0.111 *** | 0.168 *** | 0.012 | 0.288 *** | 0.090** | 0.063 |
(0.033) | (0.028) | (0.033) | (0.038) | (0.041) | (0.046) | |
Leveragei,t-1 | −0.030 *** | −0.043 *** | −0.028 ** | −0.090 *** | 0.026 ** | −0.149 *** |
(0.009) | (0.011) | (0.014) | (0.017) | (0.011) | (0.017) | |
Lifei,t-1 | −0.0004 | −0.001 *** | −0.001 * | −0.002 *** | 0.0004 | −0.002 *** |
(0.0002) | (0.0002) | (0.0003) | (0.0004) | (0.0003) | (0.0004) | |
ROAi,t-1 | −0.646 *** | −0.710 *** | −0.732 *** | −0.782 *** | −0.794 *** | −0.692 *** |
(0.036) | (0.034) | (0.041) | (0.051) | (0.051) | (0.052) | |
Sizei,t-1 | 0.018 | −0.005 | −0.030 *** | −0.046 *** | 0.067 *** | −0.025 |
(0.011) | (0.011) | (0.002) | (0.002) | (0.019) | (0.018) | |
Salei,t-1 | −0.035 *** | −0.039 *** | 0.008 | −0.044 ** | −0.034 *** | −0.040 *** |
(0.001) | (0.001) | (0.020) | (0.017) | (0.002) | (0.002) | |
Slacki,t-1 | 0.016 *** | 0.016 *** | 0.020 *** | 0.016 *** | 0.020 *** | 0.017 *** |
(0.001) | (0.001) | (0.001) | (0.001) | (0.002) | (0.001) | |
SOEi,t-1 | −0.012 *** | −0.008 *** | −0.013 *** | 0.017 *** | −0.020 *** | −0.017 *** |
(0.003) | (0.002) | (0.003) | (0.006) | (0.004) | (0.006) | |
Year Dummy | Yes | Yes | Yes | Yes | Yes | Yes |
Industry Dummy | Yes | Yes | Yes | Yes | Yes | Yes |
P-value of the inter-group coefficient difference | 0.001 | 0.007 |
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Zhou, Y.; Zhu, H.; Yang, J.; Zou, Y. Does CEO Power Backfire? The Impact of CEO Power on Corporate Strategic Change. Sustainability 2021, 13, 8847. https://doi.org/10.3390/su13168847
Zhou Y, Zhu H, Yang J, Zou Y. Does CEO Power Backfire? The Impact of CEO Power on Corporate Strategic Change. Sustainability. 2021; 13(16):8847. https://doi.org/10.3390/su13168847
Chicago/Turabian StyleZhou, Yu, Hongzhang Zhu, Jun Yang, and Yunqing Zou. 2021. "Does CEO Power Backfire? The Impact of CEO Power on Corporate Strategic Change" Sustainability 13, no. 16: 8847. https://doi.org/10.3390/su13168847