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CEO power and labor productivity

CEO power and labor productivity PurposeThis paper aims to examine how Chief Executive Officer (CEO) power affects firm-level labor productivity.Design/methodology/approachThe authors rely on regression analysis to examine the relation between CEO power and labor productivity.FindingsFollowing prior research (i.e. the sequential rank order tournament theory), the authors predict that powerful CEOs lead to high labor productivity. They find a significant and positive relationship between CEO power and labor productivity. They further decompose labor productivity into labor efficiency and labor cost components and find a positive (negative) relationship between CEO power and labor efficiency (cost) component, suggesting that more powerful CEOs better manage labor efficiency and control labor cost. The results are also robust to various additional tests.Originality/valueThis study contributes to two streams of research: the CEO power literature in finance and the labor productivity and cost literature in accounting. To the best of the authors’ knowledge, it is the first study that performs a direct empirical test on the relation between CEO power and labor productivity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting Research Journal Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1030-9616
DOI
10.1108/ARJ-05-2016-0056
Publisher site
See Article on Publisher Site

Abstract

PurposeThis paper aims to examine how Chief Executive Officer (CEO) power affects firm-level labor productivity.Design/methodology/approachThe authors rely on regression analysis to examine the relation between CEO power and labor productivity.FindingsFollowing prior research (i.e. the sequential rank order tournament theory), the authors predict that powerful CEOs lead to high labor productivity. They find a significant and positive relationship between CEO power and labor productivity. They further decompose labor productivity into labor efficiency and labor cost components and find a positive (negative) relationship between CEO power and labor efficiency (cost) component, suggesting that more powerful CEOs better manage labor efficiency and control labor cost. The results are also robust to various additional tests.Originality/valueThis study contributes to two streams of research: the CEO power literature in finance and the labor productivity and cost literature in accounting. To the best of the authors’ knowledge, it is the first study that performs a direct empirical test on the relation between CEO power and labor productivity.

Journal

Accounting Research JournalEmerald Publishing

Published: Jul 1, 2019

References