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Influence of Power Game between Major Shareholders and CEO on Company Risk-taking ¡ª¡ªEmpirical Data from China's Securities Market

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  • Xiaoyu Hu
  • Qun Wang

Abstract

Based on the theory of behavioural economics, this study starts from the cognitive behaviour and the power game of the major shareholders and CEO to explore the high risk taking of the company brought by irrational decision-making behaviours such as ¡°overconfidence¡± and ¡°loss avoidance¡± due to the high concentration of managers' power and major shareholders¡¯ power. Furthermore, the empirical tests show that domination of either the major shareholders or CEO will have a significant positive effect on the company's operational risk. However, the greater power from both parties will inevitably result in power game, and its resulting checks and balances have a significant adjustment effect on the company's risk taking.

Suggested Citation

  • Xiaoyu Hu & Qun Wang, 2019. "Influence of Power Game between Major Shareholders and CEO on Company Risk-taking ¡ª¡ªEmpirical Data from China's Securities Market," Applied Economics and Finance, Redfame publishing, vol. 6(5), pages 83-91, September.
    • Handle: RePEc:rfa:aefjnl:v:6:y:2019:i:5:p:83-91
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    References listed on IDEAS

    as
    1. Saunders, Anthony & Strock, Elizabeth & Travlos, Nickolaos G, 1990. "Ownership Structure, Deregulation, and Bank Risk Taking," Journal of Finance, American Finance Association, vol. 45(2), pages 643-654, June.
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    More about this item

    Keywords

    Cognitive behaviour; Power of major shareholders; CEO power; Risk-taking;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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