The politician as a CEO, corporate governance and firm value

• Published in: Journal of international financial markets, institutions & money Vol. 87; p. 101804
• Main Authors: Amin, Qazi Awais, Cumming, Douglas
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01-09-2023
• Subjects: Agency theory; Corporate governance; Firm value; The Politician as a CEO; Corporate governance; Firm value; C23; G30; The Politician as a CEO; G32; G34; Agency theory
• ISSN: 1042-4431; 1873-0612
• DOI: 10.1016/j.intfin.2023.101804

•The presence of the powerful politician as a CEO tends to limit the board power and endorse managerial entrenchment.•A significant negative moderating effect of the political CEOs on the relationship of concentrated ownership, board independence and firm value.•The excessive powers of CEO’s and the greater level of information asymmetries between the political CEOs and minority shareholders leads to non-value-adding decisions making.•Use of GMM estimator, the Instrumental variable approach, the Heckman selection model, PSM techniques, and the Difference-in-differences model (DiD).
Using a data set of two important emerging markets namely Taiwan and Pakistan, we investigate an unexplored dynamic of the top leadership i.e. the politician as a CEO and determine their impact on firm value. We show that the presence of the powerful politician as a CEO tends to limit the board power and endorse managerial entrenchment i.e. put their self-interests ahead of the firm's goals, which in turn, damage the firms’ value. We find a significant negative moderating effect of the political CEOs on the relationship of concentrated ownership, board independence and firm value.