@article{1a9bea08483e4ed19675283582654eed,
title = "Powerful CEOs and corporate governance",
abstract = "Excessive CEO power is often regarded as value-destroying. We use a quasi-exogenous regulatory shock to analyze whether improved governance helps to channel firms with powerful CEOs toward more value-enhancing corporate policies. We use the Sarbanes-Oxley Act and NYSE/NASDAQ listing rules and focus on firms that were required to improve governance. We find that postregulation firms led by powerful CEOs increase innovation inputs (Research and Development expenditures) and produce more innovation outputs (patents) that are scientifically more important (citations) and economically more valuable (market value of patents). Investment quality also improves, manifesting in better takeover performance and improvements in firm performance and corporate value. Our results suggest that improved governance can mitigate value destruction in powerful CEO-managed firms. We take steps to mitigate econometric concerns and ensure our results are robust to various combinations of fixed effects and control variables.",
keywords = "Board Independence, CEO Power, Corporate Governance, Innovation, Powerful CEOs, Sarbanes-Oxley Act, SOX",
author = "Mark Humphery-Jenner and Emdad Islam and Lubna Rahman and Jo-Ann Suchard",
note = "Funding Information: We thank the editor, Dawn M. Chutkow, and two anonymous referees for many constructive comments. We also thank Huu Nhan Duong, Mostafa Hasan (Discussant), Diana Knyazeva (Discussant), Shida Liu (Discussant), Ron Masulis, Peter Kien Pham, Hieu Phan (Discussant), Jayati Sarkar (Discussant), Breno Schmidt, Rik Sen, Tao Shen (Discussant), Johan Sulaeman, Kevin Tran (Discussant), Xioli Wan (Discussant), Yijun Zhou (Discussant) and participants at WRDS Advanced Research Scholar Program (2019), FMA Asia/Pacific Conference (2019), AsianFA (2019), Financial Markets and Corporate Governance Conference (2018), FIRN Annual Meeting (2018), FMA Annual Meeting (2018), University of New South Wales PhD Workshop (2018), Auckland Finance Meeting (2017), Australasian Finance and Banking Conference (2017), Emerging Markets Conference (2017), and SIRCA young researchers workshop (2017) for helpful comments. Rahman conducted this study while she was a PhD student at UNSW, supported through the Australian Government Research Training Program Scholarship. Rahman also thanks to the Auckland Finance Meeting for awarding this paper as the best paper in the Doctoral Symposium in 2017 and for their financial support. Humphery‐Jenner acknowledges the support of ARC Grant DE150100895. The paper was previously circulated as “Watching the Wolves: Unveiling Moderating Role of Corporate Governance.” All errors are our own. Publisher Copyright: {\textcopyright} 2022 Cornell Law School and Wiley Periodicals LLC.",
year = "2022",
month = mar,
doi = "10.1111/jels.12305",
language = "English",
volume = "19",
pages = "135--188",
journal = "Journal of Empirical Legal Studies",
issn = "1740-1453",
publisher = "Wiley-Blackwell",
number = "1",
}