Abstract
This current study is one of the few investigations to conduct a focalized examination of the relationship between CEO duality and firm performance; however, this relationship seems to be imprecise due to the impact of the invention mechanism. This study explores the effect of CEO duality to achieve firm performance through the mediating effects of capital structure and market competition, which is an innovative model. The study incorporated the generalized method of moments (GMM) model to examine the proposed association of the CEO duality and firm performance, and the findings specified a negative relationship between CEO duality and firm performance. The results indicated that capital structure partially mediated the association between CEO duality and firm performance. The results also showed that market competition fully mediated this linkage between CEO duality and firm performance, which in turn specified a significant positive relationship with market competition, which mediated a positive relationship. By incorporating these mediators, the results determined that CEO duality reduces firm performance through the capital structure; however, it enhances firm performance by stimulating market competition.
Highlights
CEO duality is a phenomenon where the chief executive officer of a company occupies the chair of the company’s board of directors, along with his/her regular management position [1]
Many researchers have attempted to investigate the direct association between CEO duality and firm performance
We addressed this research gap by using two variables as parallel mediators to explain the relationship between CEO duality and firm performance [101,102,103,104,105]
Summary
CEO duality is a phenomenon where the chief executive officer of a company occupies the chair of the company’s board of directors, along with his/her regular management position [1]. Recognition of the effect of CEO duality on firm performance has attracted much attention from research scholars [2,3]. Previous research investigating the impact of CEO duality on enhanced firm performance provided mixed results. The outcomes of the current literature are inconclusive, ranging from positive to negative, and sometimes indicating an insignificant relationship between CEO duality and firm performance [4,5,6,7]. Scholars arguing a negative association between CEO duality and firm performance support their findings based on agency theory. Researchers supporting the positive impact of CEO duality on firm performance refer to stewardship theory to support their stance. This study proposes capital structure and market competition as the two parallel mediating mechanisms to explain how CEO duality influences firm performance, and attempts to fill this gap in the literature
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