CEOs and the Product Market: When are Powerful CEOs Beneficial?
52 Pages Posted: 17 Jun 2014 Last revised: 20 Jul 2020
Date Written: August 2, 2017
Abstract
We examine whether industry product market conditions are important in assessing the costs and benefits of CEO power. We find that firms are more likely to have powerful CEOs in high demand product markets where firms are facing entry threats. In these markets, investors react more favorably to the announcements of granting more power to CEO and CEO power is associated with higher market value, sales growth, investment and advertising, and the introduction of more new products. These results remain when examining outcomes after predicted increases in “soft” CEO power that arise due to past director and other executive sudden death during the CEO’s tenure.
Keywords: Product Markets; Corporate Covernance; CEOs
JEL Classification: G34
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