CEO power and matching leverage preferences

Timo Korkeamäki; Eva Liljeblom; Daniel Pasternack

doi:10.1016/j.jcorpfin.2017.04.007

CEO power and matching leverage preferences

Timo Korkeamäki^*, Eva Liljeblom, Daniel Pasternack

^*Corresponding author for this work

Not published at Aalto University

Research output: Contribution to journal › Article › Scientific › peer-review

8 Citations (Scopus)

Abstract

We study the effect of managerial power on CEOs' tendency to imprint their personal leverage preferences upon the firms they manage. Using a unique data source that allows us to measure personal wealth and indebtness in great detail, we find a connection between CEOs' personal leverage and that of their firms. The connection is driven by the CEOs with a longer tenure and the CEOs who serve in a dual role. The connection is significantly weaker for those CEOs who have a proportion of their personal wealth tied to the firm. Presence of block holders also weakens the connection.

Original language	English
Pages (from-to)	19-30
Number of pages	12
Journal	JOURNAL OF CORPORATE FINANCE
Volume	45
DOIs	https://doi.org/10.1016/j.jcorpfin.2017.04.007
Publication status	Published - 1 Aug 2017
MoE publication type	A1 Journal article-refereed

Keywords

CEO behaviour
Matching preferences
Personal leverage

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10.1016/j.jcorpfin.2017.04.007

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AB - We study the effect of managerial power on CEOs' tendency to imprint their personal leverage preferences upon the firms they manage. Using a unique data source that allows us to measure personal wealth and indebtness in great detail, we find a connection between CEOs' personal leverage and that of their firms. The connection is driven by the CEOs with a longer tenure and the CEOs who serve in a dual role. The connection is significantly weaker for those CEOs who have a proportion of their personal wealth tied to the firm. Presence of block holders also weakens the connection.

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