Randomized trial reveals CEO power improves stock market performance in firms with weak governance, suggesting critical crisis management insights.
Extreme environmental uncertainty underscores the importance of CEO discretion in navigating sudden crises. Using the COVID‐19 pandemic as a quasi‐natural experiment, we find that firms led by powerful CEOs exhibit superior stock market performance during the crisis. This effect is particularly pronounced in firms characterised by weak external governance, high remote‐work compatibility and greater pre‐existing agency frictions. Mechanism analyses reveal that CEO power primarily works by improving decision efficiency, reducing information frictions, alleviating financing constraints and facilitating strategic investment. By providing causal evidence on the stabilizing role of CEO power, this study highlights CEO power as a critical yet overlooked driver of corporate resilience. Our findings offer valuable implications for crisis management and clarify the boundary conditions under which corporate governance structures are most effective.
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Tan et al. (2026) studied this question.
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