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Excess of everything is bad: CEO greed and corporate policies

Author

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  • Khalil Jebran

    (Dongbei University of Finance and Economics)

  • Shihua Chen

    (Dongbei University of Finance and Economics)

  • Wanying Cai

    (Dongbei University of Finance and Economics)

Abstract

In this study, we examine how corporate policies are driven by CEO greed. We hypothesize that greedy CEOs are inclined to implement highly aggressive policies that are beneficial for them but are harmful to shareholders. Specifically, firms with greedy CEOs take excessive risk, make higher investments (R&D and capital expenditure), acquire more debt (both short- and long-term), hoard fewer liquid assets (cash holdings and working capital), and pay less dividend. Using a sample of Chinese firms from 2010 to 2019, the results lend support to our predictions. This work contributes to the literature on upper echelon and agency theory by highlighting how organizational outcomes are influenced by the selfish behavior of greedy CEOs.

Suggested Citation

  • Khalil Jebran & Shihua Chen & Wanying Cai, 2022. "Excess of everything is bad: CEO greed and corporate policies," Review of Quantitative Finance and Accounting, Springer, vol. 59(4), pages 1577-1607, November.
    • Handle: RePEc:kap:rqfnac:v:59:y:2022:i:4:d:10.1007_s11156-022-01083-7
    DOI: 10.1007/s11156-022-01083-7
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    More about this item

    Keywords

    CEO greed; Risk-taking; Financing; Liquidity; Dividend payout; China;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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