China & World Economy / 100–119, Vol. 25, No. 6, 2017

Powerful Chief Executive Officers and Firm Performance:
Integrating Agency and Stewardship Theory

Penghua Qiao, Anna Fung, Jianchun Miao, Hung-Gay Fung

Abstract

Do agency and stewardship behaviors coexist at firms, or does one dominate the other? We use data from listed companies in China over the period 2007–2016 to show that powerful chief executive officers (CEOs) simultaneously incur self-interested agency costs while acting as stewards to benefit the firm. In balancing the push-and-pull forces of stewardship and agency behaviors, powerful CEOs in Chinese firms ultimately improve short-term and long-term firm performance. Our results have important implications for understanding how CEOs affect firms and how cultural factors can motivate CEOs to work in the interest of the firm.

Key words: agency cost, performance, powerful chief executive officer, stewardship
JEL codes: C12, D21, G34