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Article
Publication date: 11 April 2008

Nina T. Dorata and Steven T. Petra

This study seeks to examine whether CEO duality further exacerbates CEOs' motivation of self‐interest to engage in mergers and acquisitions to increase their compensation.

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2822

Abstract

Purpose

This study seeks to examine whether CEO duality further exacerbates CEOs' motivation of self‐interest to engage in mergers and acquisitions to increase their compensation.

Design/methodology/approach

Regression tests using CEO compensation as the dependent variable, and CEO duality, firm size and firm performance as independent test and control variables. The regression tests are used for various sub‐samples of the firms, those that merge and those that have CEO duality.

Findings

The results indicate that for merging firms CEO compensation is positively associated with firm size. However, this association is unaffected by CEO duality. For non‐merging firms, the results indicate that CEO compensation is positively associated with firm size and firm performance. CEO duality moderates the positive association between CEO compensation and firm performance.

Research limitations/implications

This study is limited to the extent that it does not observe the deliberations of compensation committees in their setting of CEO compensation, but only examines the outcomes of those deliberations. A future area of research is to examine compensation schemes of merger/acquisition CEOs in the context of other government structures, such as board independence and composition.

Practical implications

Shareholders who desire to keep CEO compensation levels positively associated with firm performance may consider supporting the separation of the positions of CEO and Chairperson of the Board.

Originality/value

This study contributes to the literature by concluding that governance structure influences CEO compensation schemes and CEOs of merging firms command higher compensation in spite of governance structure and firm performance.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 13 August 2012

Charles P. Cullinan, Pamela Barton Roush and Xiaochuan Zheng

CEO duality occurs when the same individual holds both the CEO and board Chair positions. In some countries (such as Britain) CEO duality is considered to impair good…

Abstract

CEO duality occurs when the same individual holds both the CEO and board Chair positions. In some countries (such as Britain) CEO duality is considered to impair good corporate governance. In the United States, however, CEO duality is still a common practice. The Sarbanes–Oxley Act (SOX) included many corporate governance reforms, but the Act did not address the issue of CEO duality. However, we suggest that the corporate governance environment surrounding the passage of SOX may have influenced corporate board decisions regarding CEO duality when appointing new CEOs. In this study, we seek to determine whether CEO duality changed in the post-Sox environment by investigating the likelihood of CEO duality when CEO changes took place before and after SOX. Using a sample of 182 CEO succession events before and after the passage of SOX, we find that the likelihood of combining the CEO and Chair positions for newly appointed CEOs significantly decreased in the post-SOX period relative to the pre-SOX period. Our results suggest the SOX environment fostered a greater focus on governance issues even beyond the specific provisions of SOX.

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Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-78052-761-1

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Article
Publication date: 5 April 2013

Patricia B. Abels and Joseph T. Martelli

This paper aims to concentrate on the prevailing agency theory along with its complementary theory of stewardship as foundations for the authors' research. Recent economic

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2844

Abstract

Purpose

This paper aims to concentrate on the prevailing agency theory along with its complementary theory of stewardship as foundations for the authors' research. Recent economic turmoil within the USA has resulted in stakeholders demanding change within governance policies of corporations. One such adjustment has been the separation of the CEO and Chairman positions within organizations. The authors' study seeks to uncover the extent to which duality CEO relationships exist in large corporations within the USA. In light of the push towards splitting the dual roles, the authors further investigated new CEOs recently appointed into the CEO position.

Design/methodology/approach

Companies selected for this study were the top 500 revenue‐producing companies in the USA as published by Fortune magazine in 2008. For comparison purposes, the authors' database included newly appointed CEOs coming on board with the original 2008 companies that had remained on the listing for both years as published by Fortune in 2010. The authors' 2008 database included 500 companies and their 2010 database included 86 companies. The North American Industry Classification System (NAICS) was the product classification used in order to establish the principal industry sector for companies under analysis.

Findings

The authors' 2008 analysis reveals that 303 CEOs hold a combination title of CEO and Chairman. The most frequent title combination is CEO and Chairman, with 156 executives holding this combined title. The authors' 2010 analysis reveals that 33 new CEOs hold a combination title of CEO and Chairman. The most frequent title combination is CEO and President with 43 executives holding the title. The authors' analysis of retired CEOs reveals that 15 retired CEOs continue serving in the capacity of Chairman of the Board of Directors.

Research limitations/implications

Using the top 500 companies in the USA, based upon sales revenue, did limit the study to large corporations within the USA.

Originality/value

The agency theory does provide an explanation of the duality movement witnessed in corporations. The practice of splitting duality roles of CEO and Chairman within public corporations appears to be becoming a reality within the USA, whether on a voluntary or a mandatory basis in order to enhance corporate independence and transparency.

Details

Corporate Governance: The international journal of business in society, vol. 13 no. 2
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 19 February 2019

Hyoung Ju Song and Kyung Ho Kang

The purpose of this study is to investigate the moderating role of CEO duality on the geographic diversification–firm performance relationship in the US lodging industry.

Abstract

Purpose

The purpose of this study is to investigate the moderating role of CEO duality on the geographic diversification–firm performance relationship in the US lodging industry.

Design/methodology/approach

To examine the individual effect of geographic diversification and the moderating effect of CEO duality, this study adopts random effects regression. Additionally, to appropriately address the endogeneity issue, this study uses random effects regression with the instrumental variable method. The sample period spans 1990-2015 and 258 firm-year observations are included.

Findings

This study finds that geographic diversification has a positive and significant effect on firm performance. Also, the result shows a positive and significant moderating role of CEO duality, which implies that the magnitude of the impact of geographic diversification on firm performance is significantly greater when CEO duality exists.

Research limitations/implications

Although it has a limitation of applying the results of this study to privately held lodging firms in other countries, US public lodging firms are encouraged to consider a corporate governance structure incorporating CEO duality to maximize the effect of geographic diversification on firm performance.

Originality/value

This study contributes to the hospitality literature by providing a unique dimension that the influence of geographic diversification is contingent on the adoption of CEO duality. And, the results of this study provide practical guidelines for the lodging firms’ implementation of geographic diversification.

Details

International Journal of Contemporary Hospitality Management, vol. 31 no. 3
Type: Research Article
ISSN: 0959-6119

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Article
Publication date: 13 June 2008

Tin Yan Lam and Shu Kam Lee

This paper seeks to examine the relationship between chief executive officer (CEO) duality and firm performance and the moderating effects of the family control factor on

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6600

Abstract

Purpose

This paper seeks to examine the relationship between chief executive officer (CEO) duality and firm performance and the moderating effects of the family control factor on this relationship with respect to public companies in Hong Kong.

Design/methodology/approach

This study employs publicly available data from financial databases and the annual reports of a sample of 128 publicly‐listed companies in Hong Kong in 2003.

Findings

Neither agency theory nor stewardship theory alone can adequately explain the duality‐performance relationship. The empirical evidence suggests that the relationship between CEO duality and accounting performance is contingent on the presence of the family control factor. CEO duality is good for non‐family firms, while non‐duality is good for family‐controlled firms.

Research limitations/implications

The study is based on publicly available financial data, and actual board processes are not observed.

Practical implications

The design of board leadership structure is contingent on corporate ownership and control (family control or not).

Originality/value

The paper provides empirical evidence that CEO duality is not necessarily bad for public companies in Hong Kong and would be of interest to regulatory bodies, business practitioners, and academic researchers.

Details

Corporate Governance: The international journal of business in society, vol. 8 no. 3
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 9 August 2021

Sandra Alves

This study draws on agency, theory to evaluate the relationship between chief executive officer (CEO) duality and earnings quality, proxied by discretionary accruals…

Abstract

Purpose

This study draws on agency, theory to evaluate the relationship between chief executive officer (CEO) duality and earnings quality, proxied by discretionary accruals. Additionally, this study aims to examine whether board independence moderates the relationship between CEO duality and earnings quality.

Design/methodology/approach

This study uses a fixed-effects regression model to examine the effect of CEO duality on earnings quality and to test whether board independence moderates that relationship for a sample of non-financial listed Portuguese firms-year from 2002 to 2016.

Findings

Consistent with agency theory, this study suggests that CEO duality decreases earnings quality. Further, the results also suggest that the earnings quality reduction associated with CEO duality is attenuated when the board of directors has a higher proportion of independent directors.

Practical implications

The findings based on this study provide useful information to investors and regulators in evaluating the impact of CEO duality on earnings quality and the effect of board independence on the role of CEO duality, especially under concentrated ownership.

Originality/value

To the knowledge, this study is the first to investigate the role of board independence on the association between CEO duality and earnings quality. In addition, this paper is the first empirical study to investigate the direct and indirect effect of CEO duality on earnings quality in Portugal.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

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Book part
Publication date: 1 January 2008

Ahmed Kholeif

Purpose – This paper aims at re-examining the predictions of agency theory with regard to the negative association between CEO duality (i.e. the Chief Executive Officer…

Abstract

Purpose – This paper aims at re-examining the predictions of agency theory with regard to the negative association between CEO duality (i.e. the Chief Executive Officer, CEO, serves also as the board chairman) and corporate performance. It also examines the role of other corporate governance mechanisms (board size, top managerial ownership and institutional ownership) as moderating variables in the relationship between CEO duality and corporate performance.

Methodology/approach – This paper uses the financial statements for the year 2006 of most actively traded Egyptian companies to examine these predictions of agency theory. Moderated Regression Analysis is used to analyse the empirical data.

Findings – The findings indicated that the hypothesized relationships between CEO duality, the moderating variables and corporate performance have changed. For companies characterized by large boards and low top management ownership, corporate performance is negatively affected by CEO duality and positively impacted by institutional ownership.

Research limitations/implications – A limitation of this study is the use of accounting-based performance measures because of the expected earnings management behaviours by CEOs.

Practical implications – The Egyptian Capital Market Authority should adopt a reform programme to encourage Egyptian listed companies to modify their governance structures by increasing top management ownership and reducing board sizes before incorporating the new governance rules into the listing requirements.

Originality/value of paper – The paper contributes to the literature on corporate governance and corporate performance by introducing a framework for identifying and analysing moderating variables that affect the relationship between CEO duality and corporate performance.

Details

Corporate Governance in Less Developed and Emerging Economies
Type: Book
ISBN: 978-1-84855-252-4

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Article
Publication date: 27 September 2019

Samuel Jebaraj Benjamin and Pallab Biswas

This study aims to examine whether CEO duality affects the association between board gender composition, dividend policy and cost of debt (COD).

Abstract

Purpose

This study aims to examine whether CEO duality affects the association between board gender composition, dividend policy and cost of debt (COD).

Design/methodology/approach

The S&P 1500 firms’ data for this study were collected from the Bloomberg professional service terminal for the period 2010-2015.

Findings

The results show that board gender composition positively impacts both a firm’s propensity to pay dividends and the level of payouts. However, this positive association is only present in firms with CEO duality. The authors find no significant association between board gender composition and COD, but when the authors split the sample into firms with and without CEO duality, the authors find a negative association in firms without CEO duality.

Practical implications

The empirical results highlight important issues for policymakers, managers and investors. The study provides positive feedback on corporate governance rejuvenation efforts that seek to engender and advocate the appointments of female directors to corporate boards. Market participants, such as financial analysts and lenders, could recognize the empirical specifics related to the influence of board gender composition on firms’ dividend policy and COD in the context of CEO duality.

Originality/value

This study fills an important gap in the literature on the relationship between board gender composition and its relation with dividend policy and COD.

Details

Accounting Research Journal, vol. 32 no. 3
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 9 January 2020

Chaminda Wijethilake and Athula Ekanayake

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…

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.

Details

Social Responsibility Journal, vol. 16 no. 8
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 17 February 2012

Robert Carty and Gail Weiss

The global financial crisis of 2008 raises many governance questions regarding the roles and responsibilities of executives and board members. Simultaneously, CEO duality

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2482

Abstract

Purpose

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

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

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

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

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.

Details

Journal of Financial Regulation and Compliance, vol. 20 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

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