The Dark Side of CEO-Board Integration: Power Dynamics in Arab Boards and Their Performance Agency Cost Implications

This study examines the moderating impact of a powerful CEO on the relationship between ‎board effectiveness and measured by meetings, size, and independence, and agency cost (proxied ‎by asset turnover ratio) and firm performance (measured by earnings per share (EPS)). Using an ‎unbalanced dataset of 295 firm-year observations from listed companies in nine Arabic countries ‎‎(2019–2023), Hausman-Taylor estimations address endogeneity concerns. The results show that ‎powerful CEOs are positively associated with firm performance but have no direct impact on ‎agency costs. Board meetings are positively linked to firm performance but not to agency costs, ‎whereas board size and independence show no direct effects. Importantly, a powerful CEO ‎significantly moderates the relationship between board meetings and agency costs, with frequent ‎meetings under powerful CEOs leading to higher agency costs. Firms should consider separating ‎the CEO and board roles and adopt safeguards, such as independent lead directors, strict meeting ‎agendas, and confidential sessions, to strengthen board independence‎.