CEO Power and Corporate Hiring Effectiveness

Arguably, power is necessary for the fiduciary responsibilities of the executive. While the debate on CEO power suggests entrenched attitudes and willful aggrandizations of wealth, there is no consensus. As such, we revisit the discussion and apply batteries of empirical estimation techniques in the US corporate environment. The result indicates that powerful CEOs make more compared to their peers, and there is a positive association between CEO power and investment in the labor market. Furthermore, we find that CEO power is less influential in financially constrained, highly levered, and illiquid firms. Also, in environments where the news of a forced CEO looms. We extend our tests to examine if their actions are purely noble by jointly evaluating CEO power and labor investment efficiency to firm value. The interaction term was not statistically significant, suggesting that while CEO power improves labor investment efficiency, the action does not improve shareholders’ value contemporaneously or in the future. Based on the findings, we add to the literature the existence of agency conflict in the CEO power and labor investment efficiency nexus