The Effect of CEO Power on Corporate Risk Taking using the Generalized Method of Moments (GMM)

Subject Areas : Journal of Investment Knowledge

mehdi hashmiyan ¹ (PhD. Student, Department of Accounting, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran)
Mohammad Ramezan Ahmadiad ² (Assistant Professor, Department of Accounting, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran Assistant Professor, Department of Accounting, Shahid Chamran University, Ahvaz, Iran)
Saeed Nasiri ³ (Assistant Professor, Department of Accounting, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran)
Alireza jorjorzadeh ⁴ (Assistant Professor, Department of Economy, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran)

Received: 2019-10-22 Accepted : 2021-01-05 Published : 2023-09-23

Keywords: ' Corporate Risk Taking", "Systematic Risk", "CEO power", " Total Risk", " Idiosyncratic Risk ",

Abstract :

The aim of this study is to investigate the effect of CEO Power on Corporate Risk Taking using the Generalized Method of Moments (GMM of listed Companies in Tehran Stock Exchange. These Three dimensions Corporate Risk Taking in our tests :( Total Risk, Idiosyncratic Risk and Systematic Risk). For this purpose one hypotheses are developed and data on the 108 companies in Tehran Stock Exchange for the period of 1389 to 1396 were analyzed. This regression model using panel data with fixed effects approach and Generalized Method of Moments (GMM), reviews and tests. The results showed that CEO Power has significantly negative impact on Corporate Risk Taking (Total Risk, Idiosyncratic Risk and Systematic Risk). Therefore, the research results indicate that the CEO power reduces Corporate Risk Taking.

References:

افلاطونی، عباس. ) 1392 (. تجزیه و تحلیل آماری با Eviews در تحقیقات حسابداری مالی، مدیریت مالی و
علوم اقتصادی. چاپ اول. تهران: انتشارات ترمه.
 توانگر حمزه کلایی، افسانه و مهدی اسکافی اصل .) 1397 (. ارتباط بین قدرت مدیرعامل، ویژگیهای کمیته
حسابرسی و کیفیت کنترل داخلی. دوره 10 ، شماره 3، صص 207 - 187 .
 حاجی ابراهیمی، مریم و هدی اسکندر. ) 1398 (. بررسی تاثیر بیش اطمینانی مدیریت بر ریسک پذیری و
عملکرد شرکت. پژوهشهای تجری حسابداری، دوره 8، شماره 3، صص 365 - 340 .
 رهنمای رودپشتی، فریدون و اناهیتا زندی.) 1398 (. قدرت مدیرعامل و ساختار سرمایه مبتنی بر مدل لی.
پژوهش حسابداری و حسابرسی، دوره 9، شماره 1، صص 20 - 1 .
 Adams, R. B., Almeida, H. and Ferreira, D. (2005), "Powerful CEOs and Their Impact on Corporate Performance", Review of Financial Studies, Vol. 18 No. 4, pp. 1403-1432.
 Baker, T. A., Lopez, T. J., Reitenga, A. L., & Ruch, G. W. (2018). The influence of CEO and CFO power on accruals and real earnings management. Review of Quantitative Finance and Accounting. doi:10.1007/s11156-018-0711-z .
 Bebchuk, L. A., Cremers, K. J. M. and Peyer, U. C. (2011), "The CEO pay slice", Journal of Financial Economics, Vol. 102 No. 1, pp. 199-221.
 Bebchuk, L., Y. Grinstein, and U. Peyer. (2011). Lucky CEOs and lucky directors. Journal of Finance. 2363-2401.
 Cheng, S. (2008), "Board size and the variability of corporate performance", Journal of Financial Economics, Vol. 87 No. 1, pp. 157-176.
 Chur Chao, C., HU,M., Munir,Q &LI, T.(2017). The impact of CEO power on corporate capital structure: New evidence from dynamic panel threshold analysis. 51(2): 107-120.
 Faccio, M., Marchica, M. T., & Mura, R. (2016). CEO gender, corporate risk‐taking, and the efficiency of capital allocation. Journal of Corporate Finance, 39, 193–209. https://doi.org/10.1016/j.jcorpfin.2016.02.008
 Faccio, M., Marchica, M.-T. and Mura, R. (2016), "CEO gender, corporate risk-taking, and the efficiency of capital allocation", Journal of Corporate Finance, Vol. 39, pp. 193-209. Farag, H. and Mallin, C. (2015), "The Impact of the Dual Board Structure and Board Diversity: Evidence from Chinese Initial Public Offerings (IPOs)", Journal of Business Ethics, pp. 1- 17. Farag, H. and Mallin, C. (2016), "The influence of CEO demographic characteristics on corporate risk-taking: evidence from Chinese IPOs", The European Journal of Finance, pp. 1-30.
 Finkelstein, S. (1992), "Power in Top Management Teams: Dimensions, Measurement, and Validation", The Academy of Management Journal, Vol. 35 No. 3, pp. 505-538.
 Finkelstein, S., & D’aveni, R. A. (1994). CEO Duality as a Double-Edged Sword: How Boards of Directors Balance Entrenchment Avoidance and Unity of Command. Academy of Management Journal, 37(5), 1079–1108.doi:10.5465/256667
پذیری شرکت با استفاده روش گشتاورهای ... / مهدی هاشمیان و همکاران ‌ بررسی تأثیر قدرت مدیرعامل بر ریسک
289 دوره 12 / پیاپی 47 / پائیز 1402
 Finkelstein, S., 1992. Power in top management teams: Dimensions, measurement, and validation. The Academy of Management Journal 35, 505-538.
 Finkelstein, S., and D.C. Hambrick. (1996). Strategic leadership: Top executives and their effects on organizations. South-Western Pub
 Hofstede, G. (2001). Culture's consequences. Thousand Oaks, CA: Sage Publications.
 Jensen, M., and W. Meckling. (1976). Theory of the firm: Managerial behavior, agency costs and Ownership Structure. Journal of Financial Economics 3(4): 305-360
 John, K., Litov, L., & Yeung, B. (2008). Corporate governance and risk‐ taking. Journal of Finance, 63, 1679–1728. https://doi.org/10.1111/ j.1540‐6261.2008.01372.x
 Lisic, L.L., T.L. Neal, I.X. Zhang, and Y. Zhang, 2016. CEO power, internal control quality, and audit committee effectiveness in substance versus in forms. Contemporary Accounting Research 33, 1199-1237.
 Liu, Y. and Jiraporn, P. (2010), "The effect of CEO power on bond ratings and yields", Journal of Empirical Finance, Vol. 17 No. 4, pp. 744-762.
 Liu, Y., and P. Jiraporn, 2010, “The impact of CEO power on bond ratings and yields”, Journal of Empirical Finance 17, 744-762.
 Mersland. R. Pascal. D., and L.A. Beisland. (2016). The influence of CEO power on agency costs in non-profit organisations: evidence from the global microfinance industry.
 Nandini, R. and K. Deepak. (1996). CEO Characteristic: Does Industry Matter?. The Academy of Management Journal 39(1): 197-255
 Pfeffer, J., & Leblebici, H. (1973). Executive Recruitment and the Development of Interfirm Organizations. Administrative Science Quarterly, 18(4), 449.doi:10.2307/2392198
 Pfeffer,J. (1997). New Directions fir Organization Theory: Problems and Prospects. Oxford University Press, New York.
 Ryan Jr., H.E., and R.A. Wiggins III, 2004. Who is in whose pocket? Director compensation, board independence, and barriers to effective monitoring. Journal of Financial Economics 73, 497-524.
 Sah, R.K., and J. Stiglitz. (1986). The Architecture of Economic System: Hierarchies and Polyarchies. American Economic Review 106: 289-295
 Sah, R.K., and J. Stiglitz. (1991). The Quality of Managers in Centralized versus Decentralized Organizations. Quarterly Journal of Economics 106: 289-295
 Sitkin, S. B., & Pablo, A. L. (1992). Reconceptualizing the determinants of risk behavior. Academy of Management Review, 17, 9–38. https://doi. org/10.5465/amr.1992.4279564
 Su, K., Li, L., & Wan, R. (2017). Ultimate ownership, risk‐taking and firm value: Evidence from China. Asia Pacific Business Review, 23(1), 10–26. https://doi.org/10.1080/13602381.2016.1152021  Su, K., Liu, H., & Zhang, H. (2019). Board size, social trust, and corporate risk taking: Evidence from China. Managerial and Decision Economics. doi:10.1002/mde.3030
 Yordanova, D. I., & Alexandrova‐Boshnakova, M. I. (2011). Gender effects on risk‐taking of entrepreneurs: Evidence from Bulgaria. International Journal of Entrepreneurial Behavior & Research, 17, 272–295. https:// doi.org/10.1108/13552551111130718

_||_