CEO power and corporate strategies: a review of the literature

Sanjukta Brahma () and Fotini Economou ()
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Sanjukta Brahma: Glasgow Caledonian University
Fotini Economou: Greece and Open University of Cyprus

Review of Quantitative Finance and Accounting, 2024, vol. 62, issue 3, No 8, 1069-1143

Abstract: Abstract In recent years, the impact of chief executive officers (CEOs) power on corporate strategies has attracted significant public debate in the academic milieu. In this study, we comprehensively review the academic literature on CEO power in relation to different corporate policies. We conduct a comprehensive review by dividing the literature into four streams: CEO power and firm performance, CEO power and executive compensation, CEO power and firm risk-taking, and finally, CEO power on other corporate strategies. Our review shows that the findings are mixed in relation to the effects of CEO power on firm strategies. Overall, the negative impact of CEO power on firm performance is attributed to agency theory, where CEOs pursue their own vested interests, thereby leading to weak corporate governance. The review reveals that the positive impact of CEO power on corporate outcomes is due to effective board monitoring, a powerful board, and high market competition. Our study also shows that most of the studies have adopted Finkelstein’s (1992) four sources of CEO power but have taken different proxies to measure these powers. We have also identified several gaps in the current studies and recommend avenues for further research.

Keywords: CEO power; Firm performance; Firm risk-taking; Executive compensation; Corporate governance (search for similar items in EconPapers)
JEL-codes: D21 D22 G3 G32 G34 M12 M52 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11156-023-01231-7

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