Investigating the Relationship between CEO Power and Capital Structure: Emphasizing the Role of Firms Size

Document Type : Research Paper


1 Prof., Department of Accounting, Faculty of Economics Management & Social Sciences, Shiraz University, Shiraz, Iran.

2 Ph.D. Candidate, Department of Accounting, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

3 MSc. Department of Accounting, KAR Higher Education Institute, Qazvin, Iran.


Objective: The main purpose of this study is to investigate the relationship between CEO power and capital structure decisions with an emphasis on the moderating role of firms size in listed companies in Tehran Stock Exchange.
Methods: In order to achieve the research purpose, the power of the CEO has been measured using the principal component analysis method and using the CEO task duality criteria, CEO tenure and CEO ownership percentage. Also, benchmarks such as book value leverage, market value leverage, short-term leverage and long-term leverage were used as capital structure representatives. Research hypotheses based on a statistical sample consisting of 106 companies during an 8-year period from 2011 to 2018 were tested using multivariate regression models and panel data method
Results: In general, the results show that there is no significant nonlinear relationship between CEO power and book value leverage and short-term leverage. Also, there is a significant nonlinear (U inverse) relationship between CEO power and market value leverage, and there is a significant linear (positive) relationship between CEO power and long-term leverage. In addition, in large corporations, there is a significant nonlinear (U shape) relationship between CEO power and book value leverage, market value leverage and short-term leverage, and there is a significant nonlinear (U inverse) relationship between CEO power and long-term leverage.
Conclusion: The results showed that the power of the CEO is one of the factors influencing the capital structure of companies. In other words, the effect of the CEO's power on the lever is complex, and it is simply incorrect to state a simple linear relationship. Also, the size of the company affects the relationship between the power of the CEO and the capital structure. Thus, in general, the results indicate that the powerful executives of large corporations do not take the same approach in their financing decisions.


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