CEO Power, Corporate Risk-Taking, and the Role of Institutional Owners: Pieces of Evidence of Tehran Stock Exchange Market and Iran Fara Bourse

Corporate governance" includes mechanisms to monitor CEO's performance to assure efficient decision adoption and maximize firm value. One of the most effective aspects of firm performance is the degree of risk-taking. This study investigates the relationship between CEO power and institutional ownership with risk-taking behavior of member firms of Tehran Stock Exchange and Iran Fara Bourse during 2010-2019 by utilizing quintile regression. According to 118 Iranian Journal of Finance, 2021, Vol. 6, No. 1 (Bigdlo, J.) the results, by the increase of CEO's power and the company's benefit from powerful managers, the company risk (total risk and systemic risk) will decrease. As a result, managers are eager to safeguard their reputation as expert decision-makers and, as a result, they try to reduce company risk. In addition, the existence of institutional ownership among the shareholders of the company will reduce the risk, which can be referred to in the agency theory. Also, if the impact of these two variables is considered together, the risk will increase significantly. This very fact reflects the exercise of the power and influence of institutional owners. As a result, large shareholders have a supervisory role in the discipline of managers, but despite their impact on the relationship between managers' power and corporate risk, they do not alter the main negative relationship. JEL Classification: G10, G30, G32, G34