Rule with an iron hand: powerful CEOs, influential shareholders and corporate performance in Russia
This study examines whether CEO power influences the book-based and market-based performance of Russian companies when it is restricted by the presence of essential shareholders, namely, state and influential businessmen.
Managerial power is divided into structural, ownership, expert, and prestige. The proposed power metrics include not only CEOs but also the Bboard of directors'’ characteristics that may restrict or enhance CEO power. The empirical analysis is based on the sample of 90 large traded Russian firms, which shares are included in the Moscow Stock Exchange Broad Market Index (MICEX BMI), observed from 2012 to 2019.
Panel data analysis suggests that higher board ownership and tenure may restrict CEO power, which in turn would be beneficial for corporate performance. the authorsWe also see that in companies owned by influential businessmen, CEO power influence on M/B value is more negative, while state ownership does not moderate it. CEO power metrics, based on political experience and tenure, affect corporate performance differently in companies affiliated with extractive industries.
First, wethe authors consider two channels through which a company in emerging markets may get additional resources: CEOs and influential owners. Second, the authorswe develop power metrics based on Finkelstein's managerial power classification (1992) and the idea of relative power proposed by Bebchuk et al. (2011). It allows identifying whether the Bboard of directors'’ may constrain or enhance CEO power to raise corporate performance. Third, the authorswe analyze developing Russian markets that represent a good ground for testing theour question, whereas empirical research on Russia is relatively scarce (Grosman and Leiponen, 2018). Fourth, the authorswe pay particular attention to the CEO power in the extractive industry, strategically important for the Russian economy.