The impact of CEO power on corporate capital structure: New evidence from dynamic panel threshold analysis

Chi-Chur Chao, May Hu, Qaiser Munir () and Tongxia Li

International Review of Economics & Finance, 2017, vol. 51, issue C, 107-120

Abstract: This study examines the non-linearity between CEO power and corporate capital structure. Previous studies show that firm leverage responds differently to CEO power changes. In order to capture this non-linear relationship, we employ an innovative dynamic panel threshold model, this novel method allows the estimation of threshold effects with panel data even in case of endogenous regressors. Using a panel-dataset of Chinese SMEs from 2009 to 2013, we find that a CEO power threshold exists in the CEO power-firm leverage association. CEO power has a strong positive and statistically significant determinant of firm leverage, in the “low-CEO power” firms. However, at “high-CEO” regime, the impact is negative but insignificant determinant of leverage. The results are robust to alternative measures of leverage and CEO power, as well as additional explanatory variables.

Keywords: Capital structure; CEO power; Nonlinear relationship; Dynamic panel threshold (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:51:y:2017:i:c:p:107-120

DOI: 10.1016/j.iref.2017.05.010

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