CEO power and firm opacity

KwangJoo (KJ) Koo and Jonghwan (Simon) Kim

Applied Economics Letters, 2019, vol. 26, issue 10, 791-794

Abstract: This paper examines the association between CEO power and firm opacity. We discuss the entrenchment and managerial power theories to develop a coherent hypothesis that captures a negative relationship. To investigate the relationship, we use CEO pay slice (CPS) and opacity index as proxies for CEO power and information environment, respectively. With alternate model specifications, we consistently find that firm opacity is positively associated with CPS. With the findings, we conclude that powerful CEOs pursue greater firm opacity–leading to poorer information environments–to hide, if any, agency issues or poor firm performance.

Date: 2019
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DOI: 10.1080/13504851.2018.1497841

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