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Does CEO duality affect corporate performance? Evidence from the US banking crisis

Robert Carty (London Metropolitan University, London, UK)
Gail Weiss (SunGard, London, UK)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Publication date: 17 February 2012

Abstract

Purpose

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The global financial crisis of 2008 raises many governance questions regarding the roles and responsibilities of executives and board members. Simultaneously, CEO duality in the USA and elsewhere has come under renewed scrutiny because of the perceived loss of checks and balances and resultant abuse of power. The authors suggest that the financial crisis presents a unique opportunity to explore the effects of, and attitudes, to CEO duality. The purpose of this paper therefore is to investigate whether CEO duality is associated with bank failure and whether bank regulators, as can be expected, are opposed to CEO duality.

Design/methodology/approach

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The authors investigated the correlation between CEO duality and publicly traded banks in the USA that received Federal bailout funds, using available databases, and investigated bank regulators' attitudes to CEO duality using a series of structured interviews.

Findings

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No correlation was found between bank failure and CEO duality. However, a strong correlation was found between bank ownership and receipt of Federal bailout funds in that publically owned banks were far more likely to have received bailout funds than banks which were privately owned. Surprisingly, it was also found that Regulators accepted CEO duality for several reasons and have no agenda to limit it.

Practical implications

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The results suggest that CEO duality is a less significant issue factor in corporate management than suggested by many previous researchers and policy makers. This has clear implications for governance, regulation and legislation.

Originality/value

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This study is the first to investigate the relationship between bank performance and CEO duality. The authors' results suggest that whilst there may be many good reasons for limiting CEO duality, the key measure of adverse effects on corporate performance in this sector is not one of them.

Keywords

Citation

Carty, R. and Weiss, G. (2012), "Does CEO duality affect corporate performance? Evidence from the US banking crisis", Journal of Financial Regulation and Compliance, Vol. 20 No. 1, pp. 26-40. https://doi.org/10.1108/13581981211199407

Download as .RIS

Publisher

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Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

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