CEOs and the Product Market: When are Powerful CEOs Beneficial?

52 Pages Posted: 17 Jun 2014 Last revised: 20 Jul 2020

See all articles by Minwen Li

Minwen Li

Tsinghua Universitiy - School of Economics and Management

Yao Lu

Tsinghua University - School of Economics & Management

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

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

Suggested Citation

Li, Minwen and Lu, Yao and Phillips, Gordon M., CEOs and the Product Market: When are Powerful CEOs Beneficial? (August 2, 2017). Available at SSRN: https://ssrn.com/abstract=2450893 or http://dx.doi.org/10.2139/ssrn.2450893

Minwen Li

Tsinghua Universitiy - School of Economics and Management ( email )

324 Weilun Building
nagement
Beijing, 100084
China
(86)10-62793685 (Phone)

Yao Lu (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Gordon M. Phillips

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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