Open Access
Journal Article
CEO power, corporate governance, and firm leverage
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DAN Department of Management & Organizational Studies, The University of Western Ontario, London, Ontario, Canada
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JEA 2024, 74; 3(3), 74; https://doi.org/10.58567/jea03030012
Received: 15 August 2023 / Accepted: 18 September 2023 / Published Online: 15 September 2024
Abstract
This study empirically examines the effect of corporate governance on the relation between CEO power and firm leverage. Results from OLS and industry fixed effects regressions show that CEO power is positively associated with firm leverage. However, this association is driven by the strength of corporate governance as powerful CEOs tend to choose higher levels of debt only when corporate governance is strong. When corporate governance is weak, CEO power does not seem to have any effect on firm leverage. Overall, results indicate that strong corporate governance mitigates the severity of manager-shareholder conflicts and induces powerful CEOs to choose higher leverage.
Copyright: © 2024 by Sheikh. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.