The relationship between CEO personal power, CEO competencies, and company performance

Abstract

This article examines the impact of chief executive officer (CEO) power (formal and informal) on company performance and investigates the relationship between the CEO’s power and the company’s financial performance: share price performance, return on assets (ROA), and Tobin’s Q. The research employed both primary and secondary data. A questionnaire collected data from 391 professionals (respondents) in the market and comprised two scales, one adapted from existing research on personal competencies of directors and the second on CEO personal power dimension and demographics. Seven hypotheses were tested. Seven were supported for share price performance, four for ROA and three for Tobin’s Q. The CEO’s is a key role in general management, probably the most important. This is the only study found in the extant literature, which investigates the links between CEO power, competencies, and company performance. It identifies some of the most important characteristics of the effective CEO.