CEO power, product market competition and firm value

Sheikh, Shahbaz A

doi:10.1016/j.ribaf.2018.04.009

Cited by 69 publications

(73 citation statements)

References 54 publications

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“…Using agency theory and the behavioral agency model, this study shows that external discipline imposed by increased market competition and monitoring through strong corporate governance induce powerful CEOs to increase corporate risk. The empirical results of this study complement the findings of Sheikh (), who reports that CEO power is associated with higher firm value when market competition is high and is not related to firm value when market competition is low. It seems that one of the possible channels of this value creation in high‐competition markets may be the higher levels of corporate risk.…”

Section: Discussionsupporting

confidence: 83%

CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

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Research Question/Issue Although there is no unified theory that can explain the relationship between CEO power and corporate risk, the empirical evidence generally finds a positive association. This study argues that market competition and corporate governance play critical roles in influencing this relationship. Research Findings/Insights Using a large panel of nonfinancial U.S. corporations for the period 1992–2015, I find that CEO power is positively associated with total and idiosyncratic measures of risk. However, this positive association remains significant only when market competition is high or corporate governance is strong. Theoretical/Academic Implications The research design of this study combines the predictions of agency theory, the behavioral agency model, and prospect theory to further our understanding of the relationship between CEO power and corporate risk, including consideration of how competition and corporate governance influence this relationship. Practitioner/Policy Implications The empirical evidence presented in this study can help boards to more accurately gauge when CEO power is most beneficial in terms of optimal levels of corporate risk and to better understand the relationship between power and risk. The results suggest that boards should grant more power to their CEOs when their firms operate in high‐competition markets or have strong corporate governance in place.

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Section: Discussionsupporting

confidence: 83%

CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

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“…The mediation effect of market competition (HHI) is positive and entirely changes this relationship. In competitive markets, a CEO with a dual role has a positive impact, with a value of 0.163, which means that CEOs work positively in high-competition markets, and this affects firm performance, undoubtedly consistent with [99]. Figure 2 shows mediation effects beyween the chosen variables of the study.…”

Section: Hypothesessupporting

confidence: 55%

“…Thus, these results support Hypothesis 3; market competition positively mediates this relationship [72] and provides support for our conclusion, also finding that market competition positively mediates the CEO duality and firm performance relationship. Market competition fully mediates the association between CEO duality and firm performance, which predicts that CEO duality will increase firm profits and help to reduce agency conflicts among shareholders and managers, thus impacting positively on firm performance [99]. After summarizing all of these results, Table 5 describes the results of all of the hypotheses in this study.…”

Section: Empirical Analysismentioning

confidence: 90%

The Effects of Market Competition, Capital Structure, and CEO Duality on Firm Performance: A Mediation Analysis by Incorporating the GMM Model Technique

et al. 2020

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This current study is one of the few investigations to conduct a focalized examination of the relationship between CEO duality and firm performance; however, this relationship seems to be imprecise due to the impact of the invention mechanism. This study explores the effect of CEO duality to achieve firm performance through the mediating effects of capital structure and market competition, which is an innovative model. The study incorporated the generalized method of moments (GMM) model to examine the proposed association of the CEO duality and firm performance, and the findings specified a negative relationship between CEO duality and firm performance. The results indicated that capital structure partially mediated the association between CEO duality and firm performance. The results also showed that market competition fully mediated this linkage between CEO duality and firm performance, which in turn specified a significant positive relationship with market competition, which mediated a positive relationship. By incorporating these mediators, the results determined that CEO duality reduces firm performance through the capital structure; however, it enhances firm performance by stimulating market competition.

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“…Product market competition has often been demonstrated as an alternative source of discipline. Sheikh (2018) uses Tobin's Q to measure firm value, and he reports that the CEO power that is driven by product market competition has a positive effect on the firm value [27]. Many studies have documented that information disclosure has a different impact on the firm value in firms that operate in a different product competition environment.…”

Section: Information Disclosure's Role In the Firm Valuementioning

confidence: 99%

“…They both find that firms with more extensive EID had a weaker negative impact on firm value. For one reason, EID can enhance firm value through improved transparency and accountability, and enhanced stakeholder trust [27]. For another reason, extensive and objective environmental disclosures can enhance a firm's share price, as they help create a positive and strong firm reputation as well as other competitive advantages [24].…”

Section: Mechanism Of Eid's Influencing Firm Valuementioning

confidence: 99%

The Impact of Environmental Information Disclosure on the Firm Value of Listed Manufacturing Firms: Evidence from China

Yang

Wen

2020

IJERPH

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In the last decade, the public concern over environmental problems has led to the emergence of environmental regulations in firms’ information disclosure on environmental practice, especially in some developing countries such as China. Based on a panel dataset composed of the listed manufacturing firms in China during 2006–2016, this paper uses the difference-in-differences (DID) model and the propensity score matching (PSM) method to investigate whether the Environmental Information Disclosure Measure (for Trial Implementation; EIDMT) affects the firm value. The results show that EIDMT exerts a significant impact on the listed manufacturing firms’ value. In consideration of the firm’s ownership, EIDMT plays a more important role in the firm value of non-state-owned firms than state-owned firms. Furthermore, using a PSM–DID model for eastern, central, and western China, we find that EIDMT significantly affects the firm value in eastern and western China but has little impact on central China.

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CEO power, product market competition and firm value

Cited by 69 publications

References 54 publications

CEO power and corporate risk: The impact of market competition and corporate governance

CEO power and corporate risk: The impact of market competition and corporate governance

The Effects of Market Competition, Capital Structure, and CEO Duality on Firm Performance: A Mediation Analysis by Incorporating the GMM Model Technique

The Impact of Environmental Information Disclosure on the Firm Value of Listed Manufacturing Firms: Evidence from China

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