CEO's managerial power, board committee memberships and idiosyncratic volatility

Tan, Monica, and Liu, Bin (2016) CEO's managerial power, board committee memberships and idiosyncratic volatility. International Review of Financial Analysis, 48. pp. 21-30.

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Abstract

Based on Upper Echelons Theory and Agency Theory, we explore the effect of CEOs' power through their tenure, board committee membership and other corporate governance factors on idiosyncratic volatility. Our study addresses the gap in the literature to find the direct link between the source of corporate governance practices and idiosyncratic volatility in stock price. We use a generalised method of moments in a panel analysis of Australian firms for 2004–2013 and a robust model that controls for firm size, firm age, trading volume, market-to-book ratio, dividend payout, the global financial crisis, product market competition and financial intermediaries. We find that CEOs who have stronger managerial power are associated with lower idiosyncratic volatility. This determining factor remains significant with the inclusion of widely-researched firm characteristics and external factors on idiosyncratic volatility in our robust analysis.

Item ID: 72976
Item Type: Article (Research - C1)
ISSN: 1873-8079
Keywords: Idiosyncratic volatility, Managerial power, Corporate governance, Asset pricing, Market power
Copyright Information: © 2016 Elsevier Inc. All rights reserved.
Date Deposited: 11 Jul 2022 23:20
FoR Codes: 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3502 Banking, finance and investment > 350202 Finance @ 100%
SEO Codes: 15 ECONOMIC FRAMEWORK > 1505 Microeconomics > 150506 Market-based mechanisms @ 100%
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