Does CEO power influence corporate risk and performance? Evidence from Greece and Hungary

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Abstract

We intend to investigate the impact of chief executive officers’ (CEO) powers on corporate decisions made by firms in the context of board oversight (BO) and market competition (MC). From 2007 to 2017, we applied a quantitative approach to a sample of two stressed European markets (i.e., Hungary and Greece). We found that CEO power has a negative impact on corporate risk and firm performance. Furthermore, results also reveal no sign of moderation effect for MC with corporate decisions, whereas BO moderated the CEO power and corporate decisions in the Hungarian market. However, the results of moderation for the Greek market are diametrically opposed to those of the Hungarian market. Our study indicates that in stressed markets, the CEO power is suppressed and does not increase the corporate risk and firm performance despite the good governance and high market competition. The study can help boards in the optimal delivery of power to the CEO to perform well in a stressed environment.

Keywords: CEO Power, Corporate Risk, Board Oversight, Market Competition, Firm Performance

Authors’ individual contribution: Conceptualization — U.-E-R.F. and G.A.; Methodology — U.-E-R.F. and R.N.-U.-D.J.; Writing — U.-E-R.F., R.N.-U.-D.J., G.A., and M.V.; Supervision — G.A. and M.V.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G3, G34, L25

Received: 19.04.2021
Accepted: 07.07.2021
Published online: 09.07.2021

How to cite this paper: Fayyaz, U.-E-R., Jalal, R. N.-U.-D., Antonucci, G., & Venditti, M. (2021). Does CEO power influence corporate risk and performance? Evidence from Greece and Hungary. Corporate Ownership & Control, 18(4), 77–89. https://doi.org/10.22495/cocv18i4art6