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Market reaction to capital expenditures of powerful CEOs

Author

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  • Anwar Boumosleh
  • Elias Raad

Abstract

It is controversial whether governance structure affects the value of the firm. This paper examines the sensitivity of firm value to capital expenditure under various levels of CEO power. The paper uses two measures of CEO power and finds that the greater the power of the CEO the less the increase in market value for a given increase in capital spending. The results are robust to the inclusion of firm and governance characteristics and indicate that the market is weary of investment decisions made by powerful CEOs.

Suggested Citation

  • Anwar Boumosleh & Elias Raad, 2012. "Market reaction to capital expenditures of powerful CEOs," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 5(4), pages 356-368.
    • Handle: RePEc:ids:ijfsmg:v:5:y:2012:i:4:p:356-368
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