An Investigation into the Relationship between CEO Power and Corporate Financial Leverage

According to agency theory, which accentuates the separation of management and ownership, managers, particularly top-level managers, make operational and strategic decisions that significantly influence corporate financial leverage. Therefore, increasing CEO power tends to affect the corporate financial leverage through making individual decisions. This study is an attempt to examine the relationship between CEO power and financial leverage of the firms listed on the Tehran Stock Exchange during 2014-2018. To conduct this research, a sample of 106 companies listed on the Tehran Stock Exchange was selected, and the research hypotheses were tested using a multivariate regression model based on panel data technique. The findings indicate that the CEO tenure and CEO ownership have a negative effect on the financial leverage and the CEO duality has a positive effect on the financial leverage. Also, in the sensitivity analysis test, a general criterion for CEO power is considered. The result shows that CEO power has a negative effect on financial leverage