In this paper, I show that CEO power, which arises from differences in national culture, can weaken a firm’s governance. Based on a hand-collected dataset with more than 5000 forced and voluntary CEO transitions across 37 countries, I find that CEOs are less likely to be dismissed for bad performance in more hierarchical countries. The results are robust to alternative measures of hierarchy, a large battery of control variables, subsample analysis, placebo tests, and different empirical methodologies. Stronger hierarchies also allow for idiosyncratic managerial styles around exogenous turnover events of CEOs. Overall, the results suggest that the power and importance of CEOs vary across countries

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Keywords Corporate governance, CEOs, Turnover, Culture, Agency problems, Managerial entrenchment
JEL Mergers; Acquisitions; Restructuring; Corporate Governance (jel G34), Government Policy and Regulation (jel G38)
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Journal Journal of Banking & Finance
Urban, D.L. (2019). The effects of culture on CEO power: International evidence from executive turnover. Journal of Banking & Finance, 104, 50–69. doi:10.1016/j.jbankfin.2019.05.003