CEO Power and ESG Performance: The Mediating Role of Managerial Risk-Taking

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Ai-Xin Lee
Chee-Wooi Hooy


Business sustainability calls for responsibility in the context of the
environmental, social, and governance (ESG) agenda. According to the upper echelons’
theory, a firm’s activities and business outcomes are charted by top management.
However, how the Chief Executive Officer (CEO) balances the firm’s profit maximisation
objectives while serving the ESG agenda remains unexplored. Therefore, this study
takes a holistic approach to examine how CEO power affects the business sustainability
of a firm through managerial risk-taking. We augment the upper echelons theory of
Hambrick and Mason (1984) by incorporating the CEO power framework of Finkelstein
(1992) with the managerial risk-taking framework of Hoskisson et al. (2017). We find
that CEO power is associated with greater managerial risk-taking and poorer business
sustainability. The ownership power, expert power and prestige power of the CEO are
important in explaining the managerial risk-taking and firm sustainability. Specifically,
financial leverage and research and development (R&D) expenses partially mediate CEO
power in explaining a firm’s ESG performance.


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