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CEO power and matching leverage preferences

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  • Korkeamäki, Timo
  • Liljeblom, Eva
  • Pasternack, Daniel

Abstract

We study the effect of managerial power on CEOs' tendency to imprint their personal leverage preferences upon the firms they manage. Using a unique data source that allows us to measure personal wealth and indebtness in great detail, we find a connection between CEOs' personal leverage and that of their firms. The connection is driven by the CEOs with a longer tenure and the CEOs who serve in a dual role. The connection is significantly weaker for those CEOs who have a proportion of their personal wealth tied to the firm. Presence of block holders also weakens the connection.

Suggested Citation

  • Korkeamäki, Timo & Liljeblom, Eva & Pasternack, Daniel, 2017. "CEO power and matching leverage preferences," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 19-30.
    • Handle: RePEc:eee:corfin:v:45:y:2017:i:c:p:19-30
    DOI: 10.1016/j.jcorpfin.2017.04.007
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