Nonlinear relationship between CEO power and capital structure: evidence from China's listed SMEs

Qaiser Munir, and Mohd Rahimie Abd Karim, and Tong, Xia Li (2016) Nonlinear relationship between CEO power and capital structure: evidence from China's listed SMEs. International Review of Economics & Finance , In Press, Accepted Manuscript — Note to users .


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This paper investigates the relationship between decisionmaking power of chief executive officers (CEOs) and corporate capital structure in the context of emerging market characterized by deep collectivism and less prescriptive regulatory and legislative environment. Using a sample of 297 firms listed on Shenzhen Stock Exchange SMEs Board from 2009 to 2013, it finds a hump-shaped association between CEO power and leverage suggesting a strong nonlinearity between these two variables. Furthermore, the results show that the entrenchment effect of CEO power on firm leverage becomes more fiercely in state-owned firms. Our findings are robust to alternative calculation procedures for the CEO power index and to alternative estimation techniques. The shareholders and policy makers might leverage our findings to improve the performance of CEOs in the Chinese small and medium-sized enterprises.

Item Type:Article
Uncontrolled Keywords:CEO power, Capita structure, Leverage, Agency theory, SMEs
Subjects:H Social Sciences > HD Industries. Land use. Labor > HD58.7-58.95 Organizational behavior, change and effectiveness. Corporate culture
Divisions:FACULTY > Faculty of Business, Economics and Accounting
ID Code:14645
Deposited By:IR Admin
Deposited On:18 Oct 2016 11:47
Last Modified:18 Oct 2016 11:47

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