CEO power and firm risk at the onset of the 2007 financial crisis and the COVID-19 health crisis: international evidence

Hamad Aldawsari (), Taufiq Choudhry () and Di Luo ()
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Hamad Aldawsari: University of Southampton
Taufiq Choudhry: University of Southampton
Di Luo: University of Dundee

Review of Quantitative Finance and Accounting, 2025, vol. 64, issue 4, No 6, 1633-1670

Abstract: Abstract We investigate the association between CEO power and firm risk at the onset of the global financial crisis in 2007 and the COVID-19 pandemic health crisis in 2020. Examining an international sample of publicly listed firms in the G7 nations between 2006 and 2021, we show that firms led by CEOs with greater power are exposed to higher risk than firms led by CEOs with lesser power. The result is primarily driven by the impact of CEO power on idiosyncratic risk rather than systematic risk. Further, we find that powerful CEOs tend to be more cautious and conservative during crises that they have no reference for or experience of, as in the case of the pandemic, during which the positive power–risk associations are less pronounced. Nevertheless, the power–risk association remains relatively unchanged during the more familiar financial crisis. This study has important implications for firms, investors, regulators, and policymakers.

Keywords: CEO power; Risk-taking; Financial crisis; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: G01 G02 G30 G32 J16 J33 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-024-01347-4

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