CEO duality and firm performance: the moderating roles of CEO informal power and board involvements

Abstract

Purpose

This study aims to draw on the resource dependence theory to synthesize the conflicting arguments as well as commonalities of the agency and stewardship perspectives on the relationship between CEO duality and firm performance.

Design/methodology/approach

Multiple regression analysis is used to analyze the data collected from a sample of 212 large-scale publicly listed companies representing 20 sectors in the Colombo Stock Exchange in Sri Lanka.

Findings

The research results based on all of 212 publicly listed companies in Sri Lanka show, in support of the agency theory, that CEO duality exerts a negative effect on firm performance when the CEO is equipped with additional informal power. Conversely, CEO duality exhibits a positive effect on firm performance when board involvements are high, a finding that supports the commonalities of the agency and stewardship theoretical perspectives.

Practical implications

By examining the governance practices and concepts in an Asian developing economy, this study provides insight into the power dynamics between the CEO and the board of directors in managerial contexts that are largely different from those in western countries.

Originality/value

This study expands the theoretical underpinning of corporate governance research by identifying the performance implications of CEO duality within the broad context of the resource provision of the board of directors and the informal power of CEOs.

Citation

Wijethilake, C. and Ekanayake, A. (2020), "CEO duality and firm performance: the moderating roles of CEO informal power and board involvements", Social Responsibility Journal, Vol. 16 No. 8, pp. 1453-1474. https://doi.org/10.1108/SRJ-12-2018-0321