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CEO power, corporate governance, and firm leverage

Author

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  • Shahbaz Sheikh

    (DAN Department of Management & Organizational Studies, The University of Western Ontario, London, Ontario, Canada)

Abstract

This study empirically examines the effect of corporate governance on the relation between CEO power and firm leverage. Results from OLS and industry fixed effects regressions show that CEO power is positively associated with firm leverage. However, this association is driven by the strength of corporate governance as powerful CEOs tend to choose higher levels of debt only when corporate governance is strong. When corporate governance is weak, CEO power does not seem to have any effect on firm leverage. Overall, results indicate that strong corporate governance mitigates the severity of manager-shareholder conflicts and induces powerful CEOs to choose higher leverage.

Suggested Citation

  • Shahbaz Sheikh, 2024. "CEO power, corporate governance, and firm leverage," Journal of Economic Analysis, Anser Press, vol. 3(3), pages 207-226, September.
    • Handle: RePEc:bba:j00001:v:3:y:2024:i:3:p:207-226:d:231
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    References listed on IDEAS

    as
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