Powerful CEOs and their Impact on Corporate Performance*

Executives can only impact firm outcomes if they have influence over crucial decisions. Based on this idea we develop and test the hypothesis that firms whose CEOs have more decision-making power should experience more variability in performance. Focusing primarily on the power the CEO has over the board and other top executives as a consequence of his formal position and titles, status as a founder, and status as the board’s sole insider, we find that stock returns are more variable for firms run by powerful CEOs. These findings suggest that the interaction between executive characteristics and organizational variables has important consequences for firm performance.