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The effects of culture on CEO power: Evidence from executive turnover

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  • Urban, Daniel

Abstract

In this paper, I show that CEO power, which arises from differences in national culture, can weaken a firm’s governance. Based on a hand-collected dataset with more than 5000 forced and voluntary CEO transitions across 37 countries, I find that CEOs are less likely to be dismissed for bad performance in more hierarchical countries. The results are robust to alternative measures of hierarchy, a large battery of control variables, subsample analysis, placebo tests, and different empirical methodologies. Stronger hierarchies also allow for idiosyncratic managerial styles around exogenous turnover events of CEOs. Overall, the results suggest that the power and importance of CEOs vary across countries.

Suggested Citation

  • Urban, Daniel, 2019. "The effects of culture on CEO power: Evidence from executive turnover," Journal of Banking & Finance, Elsevier, vol. 104(C), pages 50-69.
    • Handle: RePEc:eee:jbfina:v:104:y:2019:i:c:p:50-69
    DOI: 10.1016/j.jbankfin.2019.05.003
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    Citations

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    Cited by:

    1. Lesmeister, Simon & Limbach, Peter & Goergen, Marc, 2022. "Trust and monitoring," Journal of Banking & Finance, Elsevier, vol. 143(C).
    2. Vivek K. Pandey & Ninon K. Sutton & Tanja Steigner, 2021. "Learning in serial mergers: Evidence from a global sample," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1747-1796, October.
    3. Breuer, Wolfgang & Knetsch, Andreas, 2022. "Informal authority and economic outcomes of family firms: An issue of national power distance," International Review of Financial Analysis, Elsevier, vol. 81(C).
    4. Wołoszyn, Maciej & Kułakowski, Krzysztof, 2023. "Status achieved in an organization—Rank dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 610(C).
    5. Iwasaki, Ichiro & Ma, Xinxin & Mizobata, Satoshi, 2020. "Corporate ownership and managerial turnover in China and Eastern Europe: A comparative meta-analysis," Journal of Economics and Business, Elsevier, vol. 111(C).
    6. Xu, Jian & Liu, Yu & Abdoh, Hussein, 2022. "Foreign ownership and productivity," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 624-642.
    7. Jiaying Fan & Kai Wang & Lidong Wu, 2023. "Monitoring the Type I Agency Problem or the Type II Agency Problem? Directors Appointed by Non-State Shareholders and the CEO Turnover–Performance Sensitivity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(7), pages 2160-2189, May.
    8. Goodell, John W. & Kumar, Satish & Lahmar, Oumaima & Pandey, Nitesh, 2023. "A bibliometric analysis of cultural finance," International Review of Financial Analysis, Elsevier, vol. 85(C).

    More about this item

    Keywords

    Corporate governance; CEOs; Turnover; Culture; Agency problems; Managerial entrenchment;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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