The Study Of CEO Power; Based On The Corporate Performance Of The Listed Companies

In recent years, the relation between corporate governance and corporate performance gradually becomes one of the hot issues of academic research. Especially for listed companies, we pay more and more attention to the function of corporate governance mechanism system. In modern enterprise system, CEO is at the top of the hierarchical structure of company and on behalf of shareholders to exercise power, and participates in important decision-making; while CEO is elected by the board of directors and responsible for the board of directors as an important link of corporate governance.The background and purpose of researchThe investigation of corporate governance mechanism should not only pay attention to the influence of internal and external governance mechanism for the level of company performance, but also pay close attention to its role in keeping company performance risk stable. Therefore, in this paper, we study the relation between the CEO power of the listed company and corporate performance including the levels of performance and the variability of performance, especially the variability. And this paper will study the restriction effect of the properties and the external governance environment on the previous relation.In order to achieve the following objectives:(1) To analyze CEO power strength. The existing literatures use one or a few indicators to represent the CEO power, lack of systematic summary and induction of the strength of CEO power. According to the theory of management power on behalf of the power model of Finkelstein and combined with the actual situation of our country this article builds a system status to measure CEO power.(2)To verify the relation between CEO power strength and corporate performance. As the company’s management, CEO is at the top of the company administration management and has the independent decision-making power. CEO has the power to affect the plans about the company’s day-to-day operations and long-term strategy. These effects will lead to the changes of enterprise short-term performance and long-term performance. The existing literatures pay more attention to the level of corporate performance; this paper argues that we should also consider the effect of corporate governance mechanism on keeping performance risk stable. The effect of corporate governance mechanism is not only leading to high short-term performance level, but also the long-term development and stability of the company performance. So this article intends to use the company’s performance level and variability as dimensions to measure company performance to explore the relationship between CEO power strength and corporate performance, further discusses to make the CEO power to suit our subjective initiative with discretion, so as to maximize the use of CEO capacity, in order to realize the improvement of enterprise performance and stability of long-term performance.(3)To analyze the conditions of CEO power intensity function.First of all, this paper holds that the institutional background of companies will restrict the role of CEO power intensity on the company’s performance. Parts of the listed companies in our country are based on state-owned enterprises, and still operate as the state-owned holding company, which have the special institutional backgrounds. Enterprises of the state-owned properties have the peculiar "owner absence" situation. The problem of agency for the lack of the owner will highlight the CEO position in the enterprise and strengthen the CEO power. State-owned listed companies’special political background is bound to affect CEO power. Using the listed company’s equity as control variables in study can provides a new argument on the internal governance environment impact on relationship between CEO power and company performance.After that, under the background of marketization in our country, because of different legal, geographical, cultural and other factors, the external governance environment faced by companies are different. The pros and cons of external governance environment relate directly to the CEO to deal with the uncertainty of external environment. Poor external governance environment will strengthen enterprise external uncertainty. Uncertainty about the external environment will affect the relationship. The discussion of the influence of external governance environment on CEO influence provides new thought. The main content and ideas of paperAccording to the purpose of this study, train of thought of this paper is as follows.(1) With the core theme CEO power strength, analyze the CEO power and CEO power strength and corporate performance through literature review and theoretical interpretation analysis.(2)Use STATA to do empirical research to study the effect of CEO power strength on the corporate performance.(3)Think about the restriction conditions, including the properties of company and the external governance environment.Hence, this paper includes seven chapters:Introduction, Review of literatures, Theoretical analysis, the measurement of CEO power, Research design, the results of the empirical research and the conclusion and limitations of research. Theoretical analysis is an important chapter, which includes Manager Power Theory, Principal-agent Theory, Stewardship Theory and Resource Dependence Theory.The conclusion and main contribution of studyThrough the empirical study, this article finds that there is a significant positive correlation between CEO power strength and the corporate performance level or variability of earnings. In state-owned enterprises, this kind of influence about the CEO power strength on the corporate performance is more obvious. The optimization of external governance environment can significantly reduce the effects of CEO power strength on the variability of corporate performance, the reduction effect more appears in the non-state-owned enterprises.Based on the research of full text, the main contribution of this paper is as follows.(1) Elaborate the relationship between the CEO power strength and corporate performance in detail from three different theoretical perspectives:the Principal-agent Theory, the Stewardship Theory and Resource Dependency Theory. Construct our country’s CEO power framework combined with the reality of listed companies in our country according to the power model of power model theory of management power of CEO which can describe the strength of CEO power.(2) Use two methods to measure corporate performance:Level and Variability of corporate performance. At the same time, Restraint conditions will affect the influence of CEO power strength. The restraint conditions are the proprietary nature of our company and the external governance environment which work as control varieties.(3) Provide valuable suggestions for the management practice, mainly including three aspects:Firstly, the configuration of CEO power should be combined with the company’s operating environment, to balance the risks and benefits of concentrated power, to set the reasonable permissions of the CEO. And the CEO strength should constantly make dynamic adjustment in the process of practice, in order to achieve the optimal power configuration. Secondly, we should strengthen the supervision of management of state-owned enterprise to avoid the problem caused by owner absence which means excessive concentration of power and increases the risk of company’s business. And setting up a complete mechanism of rectifying risk-control is particularly important. Finally, local governments should further perfect the governance environment in the region to support the development of local private enterprises.