Corporate governance and generalist CEOs: evidence from board size
ISSN: 1472-0701
Article publication date: 16 August 2021
Issue publication date: 21 January 2022
Abstract
Purpose
The purpose of this study is to contribute to the debate in the literature about generalist CEOs by exploring the effect of board governance on CEO general managerial ability, focusing on one of the most crucial aspects of the board of directors, board size. Prior research shows that smaller boards constitute a more effective governance mechanism and therefore are expected to reduce agency costs.
Design/methodology/approach
The authors estimate the effect of board size on CEO general managerial ability, using a fixed-effects regression analysis, propensity score matching, as well as an instrumental-variable analysis. These techniques mitigate endogeneity greatly and make the results much more likely to show causality.
Findings
The results show that firms with smaller board size are more likely to hire generalist CEOs. Specifically, a decline in board size by one standard deviation raises CEO general managerial ability by 15.62%. A lack of diverse experiences in a small board with fewer directors makes it more necessary to hire a CEO with a broad range of professional experiences. Furthermore, the agency costs associated with generalist CEOs are greatly diminished in firms with a smaller board. Hence, firms with a smaller board are more inclined to hire generalist CEOs.
Originality/value
Although prior research has explored the effects of board size on various corporate outcomes, strategies and policies, this study is the first to investigate the effect of board size on CEO general managerial ability. This study contributes to the literature both in corporate governance and on CEO general managerial ability.
Keywords
Acknowledgements
The research was funded by Chulalongkorn University under the Ratchadapisek Sompoch Endowment Fund through Center of Excellence (CE) in Management Research for Corporate Governance and Behavioral Finance and Sasin School of Management through SASIN Major Grant for a research program.
Citation
Chatjuthamard, P., Ongsakul, V., Jiraporn, P. and Uyar, A. (2022), "Corporate governance and generalist CEOs: evidence from board size", Corporate Governance, Vol. 22 No. 1, pp. 148-158. https://doi.org/10.1108/CG-02-2021-0058
Publisher
:Emerald Publishing Limited
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