CEO power and matching leverage preferences

Korkeamäki, Timo; Liljeblom, Eva; Pasternack, Daniel

doi:10.1016/j.jcorpfin.2017.04.007

Cited by 40 publications

(28 citation statements)

References 30 publications

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“…We control for CEO characteristics that may affect corporate decision-making. CEO tenure and CEO duality proxy for CEO power (Korkeam€ aki et al, 2017). CEOs with longer tenure have more time to make the organizational changes necessary to increase their power.…”

Section: Methodsmentioning

confidence: 99%

CEO social capital and asset sell-offs

Danso

Kaprielyan

Hossain

2021

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PurposeRecent studies explore how chief executive officer (CEO) social capital affects corporate decision-making. Well-connected CEOs can have greater access to information, which can lead to better corporate decisions or permit them to amass power from hierarchy status and make self-serving decisions. This study examines whether investors perceive CEO social capital as a signal of good decision-making (assuming information asymmetry) surrounding asset sell-off events.Design/methodology/approachThe authors use multivariate regression analysis to examine the effect of CEO social capital on the cumulative abnormal returns (CARs) of the asset buyers and sellers. CARs are estimated using a market model in the period proximate to asset sell-off announcements.FindingsThe authors find that CEO social capital is positively associated with announcement returns of the asset sellers. Moreover, the positive effect of CEO social capital on announcement returns is more pronounced for sellers facing greater information asymmetry. An analysis of post-announcement stock performance reveals that the seller CEO social capital is associated with additional value generated for the shareholders of the seller after a month from the announcement date, especially if the transaction price is disclosed. Overall, findings are consistent with the argument that CEO social capital provides value in high information asymmetry environment.Originality/valueTo the authors' knowledge this is the first study to examine the effect of CEO social capital on the shareholders' wealth created by divestitures.

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Section: Methodsmentioning

confidence: 99%

CEO social capital and asset sell-offs

Danso

Kaprielyan

Hossain

2021

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“…Accounting variables are available for only less than half of our sample firms. In order not to lose sample size due to poor availability of accounting information, we follow Korkeamäki, Liljeblom and Pasternack () and many others, and use the average value for any missing observations. For robustness, we follow Alti () and set missing values equal to zero, while further creating an indicator variable that takes the value of one if the accounting information is missing.…”

Section: Methodsmentioning

confidence: 99%

“…Accounting variables are available for only less than half of our sample firms. In order not to lose sample size due to poor availability of accounting information, we follow Korkeamäki, Liljeblom and Pasternack (2017) and many others, and use the average value for any missing observations. For robustness, we follow Alti (2006)…”

Section: Methodsmentioning

confidence: 99%

National Culture and Takeover Contest Outcomes

Blomkvist

Felixson

Korkeamäki

2018

The Financial Review

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We examine the effects of cultural differences on the outcome of takeover contests. Our main focus is on individuality, which we posit to have an effect on firm behavior in international takeover contests. In a sample of international acquisitions with bidders from multiple countries, we find that individuality positively relates to the probability of placing the winning bid. We further find that takeover contest winners with high individuality scores experience lower announcement returns. Our results are consistent with the literature that links individuality to overconfidence. Our evidence suggests that firms should control culture‐related behavioral biases in their mergers and acquisitions activity.

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“…We support the contention from previous studies, which generally find that CEO dominance hampers corporate governance. Powerful CEOs are associated with lower Tobin's Q in firm and accounting profitability (Bebchuk et al 2011), higher variability in a firm's performance (Adams et al 2005), higher cost of debt in firms (Liu and Jiraporn 2010), rigged incentive pay by inducing boards to shift weight to better performance measures (Morse et al 2011), stronger association between the CEO's personal leverage and the firm's leverage (Korkeamäki et al 2017), and difficulty of removal by the board (Morck et al 1989).…”

Section: Board Structurementioning

confidence: 99%

Corporate spinoffs and executive compensation

Law

2018

Front. Bus. Res. China

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This paper investigates the impact of corporate spinoffs on executive compensation. We find no significant association between executive compensation and stock returns prior to spinoffs, but a significant positive association between the two afterwards. We also find evidence that corporate governance generally improves after the spinoff. In addition, the positive association between executive compensation and stock returns is more pronounced for firms with greater improvements in their corporate governance. Overall, our findings support the notion that spinoffs create value by reducing agency costs.

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CEO power and matching leverage preferences

Cited by 40 publications

References 30 publications

CEO social capital and asset sell-offs

CEO social capital and asset sell-offs

National Culture and Takeover Contest Outcomes

Corporate spinoffs and executive compensation

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