The link between firm risk-taking and CEO power of listed firms on the Vietnamese stock market: the role of state ownership

Tran, Ngoc Thanh et al. Article The link between firm risk-taking and CEO power of listed firms on the Vietnamese stock market: the role of state ownership Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Tran, Ngoc Thanh et al. (2024) : The link between firm risk-taking and CEO power of listed firms on the Vietnamese stock market: the role of state ownership, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 11, Iss. 1, pp. 1-16, https://doi.org/10.1080/23311975.2024.2302193 This Version is available at: https://hdl.handle.net/10419/325993 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Cogent Business & Management ISSN: 2331-1975 (Online) Journal homepage: www.tandfonline.com/journals/oabm20 The link between firm risk-taking and CEO power of listed firms on the Vietnamese stock market: the role of state ownership Ngoc Thanh Tran, Thi Ngoc Dung Pham, Dien Duan Nguyen, Trung Kien Tran, Gia Quyen Phan & Tran Thai Ha Nguyen To cite this article: Ngoc Thanh Tran, Thi Ngoc Dung Pham, Dien Duan Nguyen, Trung Kien Tran, Gia Quyen Phan & Tran Thai Ha Nguyen (2024) The link between firm risk-taking and CEO power of listed firms on the Vietnamese stock market: the role of state ownership, Cogent Business & Management, 11:1, 2302193, DOI: 10.1080/23311975.2024.2302193 To link to this article: https://doi.org/10.1080/23311975.2024.2302193 © 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group View supplementary material Published online: 22 Mar 2024. Submit your article to this journal Article views: 1800 View related articles View Crossmark data Citing articles: 2 View citing articles Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=oabm20 Banking & Finance | ReseaRch aRticle Cogent Business & ManageMent 2024, VoL. 11, no. 1, 2302193 The link between firm risk-taking and CEO power of listed firms on the Vietnamese stock market: the role of state ownership ngoc thanh trana , thi ngoc Dung Phamb , Dien Duan nguyenb , trung kien tranc , gia Quyen Phand and tran thai ha nguyene aFaculty of Finance and accounting, Ho Chi Minh City university of economics and Finance, Ho Chi Minh City, Vietnam; buniversity of Finance-Marketing, Ho Chi Minh City, Vietnam; cschool of Public Finance, College of economics, Law, and government, university of economics Ho Chi Minh City, Ho Chi Minh City, Vietnam; dDepartment of Balance sheet Management, sacombank, Ho Chi Minh City, Vietnam; eFaculty of Finance and Banking, Van Lang university, Ho Chi Minh City, Vietnam ABSTRACT the chief executive Officer (ceO) is pivotal in firm governance and is tasked with policy implementation and maximizing shareholder benefit. however, predicting ceO behaviour remains challenging, especially when considering ceO power (ceOP). hence, this study explores the link between ceOP and firm risk-taking (FRt) in selected firms on the stock market in Vietnam from 2010 to 2020. Utilizing the entropy weight methodology, a ceOP index combines structural, ownership, and expert power indicators. the sYs-gMM approach mitigates potential endogeneity issues, revealing a positive correlation between ceOP and FRt. interestingly, ceO risk aversion increases in state-owned firms’ participants, suggesting heightened supervision. Moreover, each characteristic of the ceOP index uniquely influences FRt. the findings offer theoretical and practical insights for enhancing governance and supervision mechanisms to optimize stakeholder benefits. IMPACT STATEMENT in business, avoiding all risks is impractical, and risk-taking endeavours can present growth opportunities. however, uncertainties from risks can impact financial performance, requiring corporations to demonstrate effective risk management. Decision-making and oversight of organizational activities are decided by the chief executive Officer (ceO). hence, this study explores the interaction between ceO power and firm risk-taking in the context of Vietnam. Powerful ceOs tend to gravitate towards risks, but effective governance mechanisms and board independence can balance this tendency. the study recognizes the influential role of ceO power in shaping risk-taking behaviours and emphasizes the positive impact of state ownership. Balancing ceO empowerment with organizational supervision is crucial, and solutions include comprehensive risk assessments and clear operating frameworks. however, the study acknowledges limitations and recommends guidelines for a more comprehensive analysis in future research. 1. Introduction in firm contexts, hierarchical distinctions are widely recognized, wherein individuals are stratified based on their control over resources and capacity to dispense rewards or punishments (keltner et al., 2003; ting etal., 2017). Decision-making and oversight of organizational activities are undertaken by the chief executive Officer (ceO) (adams et al., 2005). however, decision-making processes within firms exhibit variations, with some ceOs assuming sole authority over critical decisions, while others rely on the collective judgment of the board of directors (haider & Fang, 2018). When considering ceOs’ significant power, their decisions are pivotal in strategic resource allocation about investments, leverage, © 2024 the author(s). Published by informa uK Limited, trading as taylor & Francis group CONTACT tran thai Ha nguyen [email protected] Faculty of Finance and Banking, Van Lang university, Ho Chi Minh City, Vietnam. additional affiliation of gia Quyen Phan: Faculty of accounting and Finance, nha trang university, Khanh Hoa Province, Vietnam. https://doi.org/10.1080/23311975.2024.2302193 this is an open access article distributed under the terms of the Creative Commons attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the terms on which this article has been published allow the posting of the accepted Manuscript in a repository by the author(s) or with their consent. ARTICLE HISTORY Received 11 March 2023 Revised 28 December 2023 accepted 2 January 2024 KEYWORDS ceO; ownership power, structural power; expert power; risk-taking; state ownership; Vietnam JEL CLASSIFICATION M00; g30; g32 REVIEWING EDITOR David McMillan, University of stirling, United kingdom SUBJECTS asian studies; Risk assessment; Business, Management and accounting 2n. t. tRan etal. performance, and risk management (crossland et al., 2014). it is considered to be the ability of individuals to assert their will and exert influence over others (Finkelstein, 1992); power can contribute to effective governance and diminish operational uncertainty within corporations when wielded by ceOs (haider & Fang, 2018). nonetheless, this power can also be susceptible to exploitation for personal gains, potentially compromising operational efficiency and oversight through both formal and informal means (adams et al., 2005; ting et al., 2017). this duality evokes concerns regarding the potential influence of ceO power (ceOP) on firm interests, as indicated by the literature, which suggests the existence of trade-offs in terms of the advantages and disadvantages associated with granting the ceO greater decision-making authority (han et al., 2016). concurrently, risk-taking plays a pivotal role in a firm’s performance and competitive edge within the industry (cheng et al., 2020; nguyen et al., 2020). Variation is exhibited in the debates surrounding the appropriate level of risk-taking and its impact on firm performance (thi Pham & thi Dao, 2022); nevertheless, risk-taking entails uncertainties that can emanate from various internal or external factors, exerting an influence on firm profitability and giving rise to fluctuations in financial performance (Jo & na, 2012). notably, prior investigations have underscored the pivotal role of robust firm governance with the central role of ceOs in enhancing firms’ performance and managing their level of risk (Braga-alves & shastri, 2011; Faccio etal., 2016). ceOs assume responsibility for firm governance mechanisms as they administer crucial firm policies (adams et al., 2005). When ceOs perceive power as a crucial aspect of their, they engage more risk-taking in contemplating the significance of the organizational change, gaining valuable insights into external opportunities, and decisively driving the development of business strategies, enabling them to make long-term decisions that align with the business interests and the advancement of the organization role (anderson & galinsky, 2006; sassenberg et al., 2012). thus, an elevated level of ceOP frequently correlates with increased potential for managing volatility and extraordinary firm performance (han etal., 2016; ting et al., 2017), heightened severity in earnings management (le et al., 2022; shiah-hou, 2021), and a greater inclination towards risk-taking (Foong et al., 2021; haider & Fang, 2018; li, 2019). indeed, the role of power revolves around the power access-inhibition theory, which holds that power has dual effects: access and inhibition (cho & keltner, 2020; keltner et al., 2003). the concept of access effect involves individuals exhibiting behaviours directed towards achieving goals when driven by positive stimuli, often involving taking more risks. conversely, the inhibition effect pertains to individuals undertaking actions aimed at risk avoidance when motivated by negative incentives. considerable power vested in a ceO may influence an increased willingness to take risks (lewellyn & Muller-kahle, 2012; li & tang, 2010). this heightened risk propensity can facilitate the ceO in making strategic, long-term decisions that align with business interests and organizational development, as anderson and galinsky (2006) discussed. however, the power reaches an excessive level, it also leads powerholders to become mindlessly optimistic (anderson & galinsky, 2006; Fast et al., 2012), acting on their desires in unethical ways (hirsh et al., 2011; kennedy & anderson, 2017), and being more disinhibited in behaviour (Patrick et al., 2009; Zhou et al., 2021). the recognition that a director’s inclination to take risks and pursue lucrative opportunities is a result of influence predominantly arising from their ability to control valuable resources and dispense rewards and punishments (Finkelstein, 1992). the important question is, are influential ceOs more likely to risk initiating firm strategic change due to their access to and allocation of abundant resources? Or, given the growing resistance to change within the organization, do ceOs bring about less firm risk-taking (FRt) as their power increases? Despite extensive scholarly inquiry, the impact of ceOP on firm risk-taking has largely escaped scrutiny in academic research. in previous studies, another factor influencing FRt is the correlation between risk-taking and organizational structure and governance (Faccio etal., 2011). as Vo (2018) suggested, this connection originates from investment horizons and the diverse risk preferences of distinct shareholders. Uddin (2016) adds a layer to this understanding by asserting that government ownership in a corporation directly shapes its risk-taking behaviours in both investment and trading, ultimately influencing its performance and survival in a competitive market. Previous studies also underscore the impact of disparities between public and non-public sectors on firm activities, especially in assuming certain risks for competitive advantage and innovation (song etal., 2020; Zhou etal., 2016). By leveraging their political connections, state-owned enterprises typically receive financial incentives and policies that bolster their effectiveness and competitiveness (Ben-nasr et al., 2015). consequently, state-owned enterprise managers often perceive political cOgent BUsiness & ManageMent 3 relationships as a means to mitigate external uncertainties (schweizer et al., 2019). however, it is crucial to acknowledge that these political connections can introduce complexities into firm strategy. sOes frequently grapple with excessive interference and a lack of independence for operating activities (Bhatti & sarwet, 2011). Moreover, they may deviate from conventional governance principles, altering the goals and activities of corporations (abramov etal., 2017). sOe managers might prioritize social objectives and short-term political goals over maximizing performance (kang & kim, 2012). in light of these considerations, although extensive research has been conducted, the impact of ceOP and state ownership (sO) influences on FRt have not been examined in academic research. First, agency theory-based predictions are weak and inconsistent (Finkelstein et al., 2008). some scholars have proposed that the absence of clear-cut relationships could stem from the presumption in agency theory that managers possess consistent risk preferences, either leaning towards risk aversion or risk neutrality (sanders & hambrick, 2007). indeed, the measurements of the ceO considered do not fully reflect the power of the ceO, and therefore, the previous results are still highly inconclusive. Prior studies on ceOP measured "power" from both insider or duality perspective and disregarding other dimensions of power, for instance, the ceO’s gender (Faccio et al., 2016; hang, 2022; ting et al., 2017) or the ceO’s ownership percentage (Pham & Pham, 2020; Vu et al., 2019). this assumption fails to consider that managers may be risk-seekers in specific contexts. they could be observed in Mubeen et al. (2021), who examined the concurrent ceO in a firm or the number of years in the ceO position. second, a divergence of opinion exists among scholars regarding the role of ceOP on risk preference in decision-making. some studies suggest that excessive power may lead to risky activities (keltner et al., 2003; tang et al., 2011), while others provide evidence of conservative decision-making under increased power (anderson & Berdahl, 2002; Maner etal., 2007). thirdly, this investigation underscores the pivotal role played by sO in shaping FRt behaviour. While previous studies have made assertions regarding the impacts of sO (nguyen etal., 2020; Vo, 2018), the absence of a clear connection between sO and ceOP presents a notable research gap that requires attention. given that government objectives mirror its interests, and the ceO might function as a representative of either the government or other shareholders, potential conflicts could arise in decision-making related to risk-taking activities. this potential discord between the ceO and other stakeholders or between the ceO and the government necessitates a closer examination of the interplay between sO and ceOP within the scope of this study. this study explores the relationship among ceOP, sO and FRt by constructing the indicators of the power components. Moreover, we consider the power connection between sO and ceOP that determines whose interests are likely to be pursued (Finkelstein et al., 2008). Our study contends that a heightened inclination for involvement in risky endeavours correlates with elevated levels of ceOP; nevertheless, this inclination also draws resistance and scrutiny from other stakeholders, influencing the change in risk-taking mindset (Zhou et al., 2021). thus, Vietnam serves as a compelling research case to explore the impact of sO and ceOP, owing to its past status as an emerging transitional country and its historical backdrop of a centrally-planned economy characterized by the prevalence of state-owned enterprises (Vo, 2018). at the same time, this study provides practical implications for Vietnam’s current firm governance regime. Vietnam’s firm governance regulations are primarily based on the law on securities 2019, the law on enterprises 2020, and other relevant regulations which require further scientific evidence to practice subordinate regulations effectively. however, Vietnam lacks key sources of firm governance references found in more developed economies, such as firm governance practices and effectiveness. this paper is organized in a 5-parts structure. in addition to the introduction, section 2 is a literature review. section 3 describes the data, models, measurements, and related formulas. section 4 discusses the main findings. section 5 presents the conclusions, practical suggestions, and limitations. 2. Literature review 2.1. Theories of firm risk-taking and CEO power the concept of power in governance is defined by Pfeffer and salancik (1978) as the capacity to exert control over individuals or objects. thus, ceOP is characterized by haleblian and Finikelstein (1993) as 4n. t. tRan etal. consistently influencing crucial corporate decisions. in a broader context, the capability to navigate internal and external resources to address challenges can be seen as power for ceOs (Finkelstein, 1992). it is also posited by Baldenius etal. (2014) that greater control and influence over other managers are often exercised by a powerful ceO. Recent research on ceOP focuses on three key theories: the theory of power involving approach and inhibition effects, agency theory, and prospect and social psychology theories. Regarding the aspect of risk-taking behaviour, the agency theory suggests that ceOs with more power tend to avoid risks to protect their personal gains in corporations. this theory centres on the separation of ownership and control and addresses conflicts of interest between shareholders and managers and differences in risk attitudes (Band, 1992; Jensen & Meckling, 1976). it assumes managers have distinct goals and are risk-averse, particularly in the absence of proper governance mechanisms. Without the ability to diversify employment risk, ceOs may exhibit heightened risk aversion, taking fewer risks to protect their personal interests (Bertrand & Mullainathan, 2003). however, keltner et al. (2003) presented a comprehensive theory of power that explores both the approach and inhibition effects, shedding light on the dual consequences associated with power. When individuals possess higher levels of power, it activates their behavioural approach system (Bas) for two primary reasons: access to resources and autonomy in pursuing their goals. according to this theory, powerful ceOs exhibit greater self-assurance regarding potential rewards, resulting in reduced risk aversion (Zhou et al., 2021). Previous studies have shown that increased ceOP leads to heightened confidence in obtaining rewards, ultimately leading to decreased risk aversion (keltner et al., 2003). Meanwhile, the Behavioral agency Model (BaM) posits that loss-averse managers have their risk-taking behaviour influenced by compensation strategies (Wiseman & gomez-Mejia, 1998). executives may prioritize safeguarding current wealth over pursuing new gains, potentially dampening their inclination for managerial risk-taking. the negative relationship between ceOP and FRt implies that highly influential ceOs may lean towards risk aversion in decision-making. therefore, ceO risk-taking attitudes are further influenced by decision frameworks and reference points tied to their power and corporate performance (keltner etal., 2003). the theories of power underscore the dual effects of power: increased power activates the approach system, encouraging risk-taking (sheikh, 2019), while diminished power activates the inhibition system, leading to risk aversion (Zhou et al., 2021). 2.2. Previous studies and hypothesis development Regarding empirical findings, most studies indicate a relationship between ceOP and FRt. it is worth noting that various measures and regions have been used to assess ceOP, as outlined in the literature (loukil & Yousfi, 2022; shabir et al., 2023). these measures often consider duality, independence, ownership, and tenure to gauge the extent of a ceO’s resource control and influence (Finkelstein, 1992; tang etal., 2011). For instance, a study by cheikh (2014) highlighted that a higher ceOP index could indicate that the ceO held the position of the sole inside director or even served as the chairperson, thereby exerting a substantial influence on the board. in such cases, the ceO might be more inclined to pursue risky investment strategies to secure private benefits. Furthermore, a study by Farag and Mallin (2016) examined the influence of duality and the number of directors on the risk-taking of listed firms in spain between 1995 and 2000, and a positive relationship between the duality of ceO and firm risk-taking was revealed. When the roles of chairman and ceO were combined into one individual, the ability to effectively oversee and control decision-making was diminished, resulting in a greater propensity for riskier choices. similarly, sheikh (2019) perceived that ceOP had a link with firm risk. Using a panel of non-financial Us corporations from 1992 to 2015, positive relationships between ceOP and FRt (total risk and idiosyncratic risk) were identified only in high-competition markets or with good firm governance, according to the study, but a significant effect of ceOP on firm risk was not found in low-competition markets or with weak firm governance. then, this study suggested that a ceO’s risk attitude was shaped by decision-making frameworks and reference points, with more powerful ceOs relating higher risk tolerance levels, according to the prospect theory posited by kahneman and tversky (1979). thus, the first hypothesis posits positive effect of ceOP on FRt. cOgent BUsiness & ManageMent 5 h1: ceO power positively influences firm risk-taking. Various studies have explored the intricate relationship between ceOP and FRt, considering different aspects of ceOP. examination of ceOP components such as prestige (academic degree), ownership, expert (ceO tenure), structural (duality of ceO and inside directors), and demographic (age and gender) power was conducted by haider and Fang (2018). Results revealed a significant negative association between ceOP and both total and idiosyncratic risks, challenging the notion that ceOs consistently favour risky ventures. Zou et al. (2020) differentiated formal (ownership and duality) and informal (independence and tenure) ceOP, finding a positive link between formal power from ownership and firm risk, while informal power from expertise (tenure) showed a negative association. ceO ownership was perceived as closely linked with firm performance, possibly motivating the pursuit of ventures with elevated risks. in contrast, the duration of a ceO’s tenure was associated with diminished firm risk, as it augmented decision-making caution in situations characterized by uncertainty. ceO duality, however, provided insufficient incentives for increased risk-taking (Foong et al., 2021). in a nuanced approach, Foong et al. (2021) studied ceOP in family firms, revealing mixed findings regarding structural and expert power promoting higher risk-taking and ownership power correlating with lower risk-taking. li (2019) explored ceOP across a diverse sample, finding that powerful ceOs tended to take higher risks, influenced by opportunistic decision-making prioritizing personal interests. ceO tenure emerged as a significant factor, allowing for greater risk embracement due to extensive familiarity with the firm’s structure and processes (cheikh, 2014). Varied theoretical and methodological approaches are attributed to the divergent research findings. this study underscores the multidimensional nature of ceOP, incorporating tenure, ownership, duality and independence in the director board of ceO (Foong et al., 2021; Zou et al., 2020). hence, the second hypothesis posits diverse effects of ceOP characteristics on FRt. h2: ceO power’s characteristics yield varied impacts on firm risk-taking. While agency theory traditionally addresses conflicts between managers and shareholders, its applicability extends to explaining the conduct of state owners as stakeholders (nguyen & Wong, 2021; tran et al., 2023). indeed, the dynamics differ for different owners, whose interests are intricately linked to overall wealth portfolios, personal gains and losses, and the potential for entrenchment (Uddin, 2016). sO introduces a scenario where the owner or presenter of enterprises functions under state influences. Under pressure to preserve capital, representatives of sO rarely venture into high-risk investment projects, often opting for risk aversion to safeguard their positions and benefits (nguyen et al., 2020). although the corporation’s risk profile reflects diverse shareholder interests and is notably influenced by the government, sO often holds the preeminent position as the most politically powerful shareholder, irrespective of percentage (sharma et al., 2020). approaching it from an agency theory standpoint, the extent to which a ceO shapes a firm’s risk-taking behaviour is intricately tied to the firm’s ownership structure, as noted by haider and Fang (2018). the ownership structure delineates the decision-making processes, managerial oversight, and compensation mechanisms, thereby substantially influencing a firm’s risk profile (Jensen & Meckling, 1976). When the government assumes a pivotal role as a major shareholder, inherent conflicts arise between governmental objectives and those of the ceOs. state-owned enterprises juggle financial and social goals concurrently, whereas ceOs prioritize a more straightforward cost-benefit analysis (chintrakarn et al., 2014). Moreover, the socio-political inclinations of government officials become crucial in evaluating and promoting ceOs in state-owned enterprises (Duong et al., 2023). several studies, including those by Vo (2018) and nguyen et al. (2020), have revealed that state-owned listed corporations tend to be more risk-averse compared to their non-state-owned counterparts. Drawing from this empirical foundation, significant shareholders shape the dynamic between ceOP and a firm’s willingness to take risks through active monitoring and control, ultimately aligning with the firm’s best interests (haider & Fang, 2018). in light of these insights, we formulate the third hypothesis as follows: h3a: state ownership reduces the influences of ceO power on firm risk-taking. h3b: state ownership reduces the influences of ceO power’s characteristics on firm risk-taking. 6n. t. tRan etal. 3. Data and method 3.1. Data Data for this study were collected from listed firms on the Vietnam stock exchanges during the period from 2010 to 2020. Financial information was extracted from financial statements, and indicators of ceOP were derived from firm governance reports. Firms with incomplete information were excluded to ensure comprehensive data, leading to a final sample of 303 corporations with 3,121 observations. additionally, it is essential to note that institutions in the financial sector, including banking, securities, and insurance industries, were not included in the study. 3.2. Variable descriptions 3.2.1. Firm risk-taking Firm executives seek to embrace higher risks in pursuing strategies, aiming to maximize profits despite the increased volatility in financial performance caused by internal and external uncertainties (Darsono etal., 2022; nguyen etal., 2020). the fluctuation in returns over time serves as an indicator of the firm’s level of risk-taking. in alignment with previous studies, we employ two variables as proxies for FRt. First, Risk1 is measured as the standard deviation of return on assets (ROa), and a higher standard deviation in this variable reflects increased FRt, followed by Zou et al. (2020) and nguyen et al. (2020). this measure captures debt risk and encompasses any realized risks affecting a firm’s profits (Mihet, 2013). calculating the standard deviation of ROa requires at least three years of ROa data (e.g. t-2 to t). RISK T ROA T ROA T it t T it T it 11 1 1 3 11 2 =− −≥ = ∑∑ ( )| (1) second, Risk2 is measured by the standard deviation of daily stock returns (DsR) in a year (chakraborty etal., 2019; Zou etal., 2020). Regarded as the market risk gauge, this proxy signifies the extent of equity risk manifested in the volatility of stock returns (T is the number of trading days in a year). RISK T DSR T DSR it t T it T it 21 1 1 11 2 =−− = ∑∑ () (2) 3.2.2. CEO power Four ceOP aspects, namely structural Power, expert Power, Ownership Power, and Prestige Power, were identified by Finkelstein (1992). however, tang et al. (2011) eliminated Prestige Power, deeming it non-essential. Following their suggestion and that of han et al. (2016), this study focuses on three dimensions of ceOP: (i) structural Power showing the ceO’s authority, measured by the proportion of independent board members and duality of ceO. (ii) Ownership Power, reflecting the ceO’s influence over compensation and decision-making, gauged by the percentage of shares held by the ceO. (iii) expert Power, transferring the ceO’s knowledge and experience, measured by ceO tenure. to address the limitation of prior studies measuring ceOP separately, the study employs the entropy weight methodology to combine indicators in table 1. this approach enhances objectivity by avoiding human factor interference in indicator weights (Ding et al., 2017; Wu et al., 2017). the entropy method, proven reliable in Table 1. CeoP indicators. aspects Variables Definition structure power independence of board (Ceo_inDe) the proportion is assigned by independent members in the total members of the director board. Duality (Ceo_DuaL) the dummy variable is assigned a value of 1 when the Ceo acts as the chairman of the board and 0 otherwise. ownership power ownership (Ceo_oWn) the proportion of common shares being held by the Ceo. expert power tenure (Ceo_tenuRe) the duration of the Ceo’s tenure in years. source: tang et al. (2011) and Finkelstein (1992). cOgent BUsiness & ManageMent 7 calculating weights, is applied after standardizing all ceOP-related variables. the study calculates each variable’s weight related to ceOP based on entropy values. ceOP, ranging from zero to one, is then determined by weighting each variable’s score, with a higher value indicating greater ceOP (Dong etal., 2016; teixeira et al., 2021). 3.3. Models the following equations are employed to examine the correlation between the risk-taking behaviour and ceOP of selected firms in Vietnam. Our models are categorized into 04 distinct groups representing firm risk, ceOP, firm characteristics, and macro factors: FRISK *FRISK *CEOP *SIZE *DEBT it it it it it =+ + ++ + − βγ β β β 30 3 1 31 32 33 ββ β β β βε 34 35 36 37 38 *CE *TBQ *SALEGR *HHI *INF it it it it it it + + + ++ (3) where FRiskit represents the firm risk-taking and is described in section 4.2. ceOit reflects the level of ceOP, which is measured in section 3.2.2. sOit is measured by the percentage of shares held by the state or state agents or state-owned enterprises (nguyen & Wong, 2021). FRISK *FRISK *CEOP *CEOP *SO *SI it it it it it =+ ++ + − βγ β β β 50 5 1 51 52 53 ZZE *DEBT *CE *TBQ *SALEGR *HHI it it it it it it ++ ++ + ββ ββ β 54 55 56 57 58 ++ + βε 59 *INFit it (4) as in prior studies of Zou etal., 2020, nguyen etal. (2020), sheikh (2019), haider and Fang (2018) and assidi et al. (2016) and other previous studies, siZeit, DeBtit, ceit, tBQit, and salegRit present the firm characteristics, meanwhile, macro factors include hhiit (herfindahl-hirschman index), reflecting market concentration, and inflation (inFit), gathered from the World Wide indicator. εit represents the residual. all of the varibale descriptions are shown in table 2. then, we extend the models by using ceOP characteristics to assess their differential impact on risk-taking behaviour in the following regression model: FRISK *FRISK *CEOC *SIZE *DEBT it it it it it =+ + ++ + − βγ β β β 40 4 1 41 42 43 ββ β β β βε 44 45 46 47 48 *CE *TBQ *SALEGR *HHI *INF it it it it it it + + + ++ (5) last, we examine the influence of sO on ceOP and changes in risk-taking behaviour, including the ceOP index and the components of ceOP (ceOc) indexes as follows: FRISK *FRISK *CEOC *CEOC *SO *SIZ it it it it it =+ ++ + − βγ β β β 0 6 1 61 62 63 EE *DEBT *CE *TBQ *SALEGR *HHI it it it it it it ++ ++ ++ ββ ββ β 64 65 66 67 68 ββ ε 69 *INFit it + (6) where ceO ownership (ceO_OWn), ceO duality (ceO_DUal), ceO tenure (ceO_tenURe) and ceO in board independence (ceO_inDe) are components of ceOc. Table 2. Variable descriptions. Variable Definition Measurement RisK1 Firm risk-taking as indicated in section 3.2.1. RisK2 Firm risk-taking as indicated in section 3.2.1. CeoP Power of Ceo as indicated in section 3.2.2. so state ownership the proportion is assigned by number of shares held by the state/state agents/state ownership enterprises in total shares. siZe Firm size total assets’ natural logarithm at the year-end. DeBt Firm debt the proportion of total debt in total assets at the year-end. Ce Firm capex expenditure the proportion of capital cost in total assets at the year-end. tBQ Firm market value the ratio of market value to book value of assets. saLegR Firm development the annual rate of change in firm sale HHi Herfindahl-Hirschman index squaring the market share of each competing firm in a given market and summing up these squared values inF inflation the changes in the yearly consumer price index source: author. 14 n. t. tRan etal. 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