Impact of Pyramidal Structure on Firm Performance and Liquidity: The Moderating Role of CEO Power

Abstract

The study examines the impact of pyramidal structure on firm performance and liquidity. It also examines how the CEO's power moderates the relationship between pyramidal structure and firm performance, as well as between pyramidal structure and liquidity. The study utilizes data from 220 non-financial companies listed on the BSE and PSX for the period 2014-2019. The results suggest that the pyramidal structure has a negative influence on firm performance and liquidity. The CEO's power has been measured using three proxies – CEO pay gap, CEO tenure, and CEO founder status. We found that the CEO pay gap does not influence firm performance or liquidity. The CEO tenure and the CEO founder status negatively influence the firm's performance; however, they do not affect the liquidity. The study also finds that the CEO pay gap has a negative moderating effect, while the CEO tenure has a positive moderating effect on the association between pyramidal structure, firm performance, and liquidity. The CEO founder status does not affect the association between pyramidal structure, firm performance, and liquidity. The study confirms the role of the pyramidal structure on firm performance and liquidity. It also examined the moderating role of CEO power on the association between pyramidal structure, firm performance, and liquidity, especially for emerging economies like India and Pakistan.