The Influence of CEOs' Hubris on Firms' Performance in Indonesia: The Moderating Effects of CEOs' Power and Board Vigilance

Studies of CEOs' hubris have long found that board vigilance is effective in controlling the negative influence of CEOs' hubris on firms' performance. Past studies specifically argued that the CEOs' non-duality and independent directors' representations are the determinants of board vigilance. However, these studies have only explored the causal relationship in the one-tier corporate governance setting. Therefore, this study analyzed the influence of CEOs' hubris on firms' performance in Indonesia, by adopting two-tier corporate governance by taking into account the CEO-board power dynamics. Hierarchical regressions were performed on 99 public listed firms. The results found CEOs' hubris in Indonesia contributes positively to firms' performance, while boards with a large number of commissioners are effective in strengthening the positive influence of hubris on firms' performance. Furthermore, this study hints that two-tier corporate governance is more efficient in controlling hubris than the one-tier system.