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CEO power and labor productivity

Emily Breit (Fort Hays State University, Hays, Kansas, USA)
Xuehu (Jason) Song (Department of Accounting and Finance, California State University, Stanislaus, USA and School of Accounting, Oklahoma State University, Stillwater, USA)
Li Sun (University of Tulsa, Tulsa, Oklahoma, USA)
Joseph Zhang (University of Memphis, Memphis, Tennessee, USA)

Accounting Research Journal

ISSN: 1030-9616

Article publication date: 1 July 2019

Abstract

Purpose

This paper aims to examine how Chief Executive Officer (CEO) power affects firm-level labor productivity.

Design/methodology/approach

The authors rely on regression analysis to examine the relation between CEO power and labor productivity.

Findings

Following prior research (i.e. the sequential rank order tournament theory), the authors predict that powerful CEOs lead to high labor productivity. They find a significant and positive relationship between CEO power and labor productivity. They further decompose labor productivity into labor efficiency and labor cost components and find a positive (negative) relationship between CEO power and labor efficiency (cost) component, suggesting that more powerful CEOs better manage labor efficiency and control labor cost. The results are also robust to various additional tests.

Originality/value

This study contributes to two streams of research: the CEO power literature in finance and the labor productivity and cost literature in accounting. To the best of the authors’ knowledge, it is the first study that performs a direct empirical test on the relation between CEO power and labor productivity.

Keywords

Citation

Breit, E., Song, X.(J)., Sun, L. and Zhang, J. (2019), "CEO power and labor productivity", Accounting Research Journal, Vol. 32 No. 2, pp. 148-165. https://doi.org/10.1108/ARJ-05-2016-0056

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited