CEO-chair Duality Research Articles

THE POST COVID EFFECT OF CORPORATE GOVERNANCE ON FIRM PERFORMANCE: A STUDY ON PRIVATE COMMERCIAL BANK IN BANGLADESH

Due to extensive corporate disgraces and catastrophes around the globe, there has been a transformed attention in the influence of corporate governance (CG) and firm performance (FP). The mainstream of research concerning CG and its effect on FP has been assumed in developed markets and countries, mostly the US and UK, but somewhat little indication is provided in the developing countries like Bangladesh. This report has examined the impact of corporate governance mechanisms on firm performance from Bangladesh’s perspective. This study primarily employs agency theory that indicates that the firms with strong corporate governance outperform firms with weaker governance. We used Board Size, Board composition, board expertise and CEO chair duality as variables of CG and EPS, ROA, and ROE as indicators of FP. We collected information from the managers, senior managers, and CFOs of private financial institutions (commercial banks) in Bangladesh for 2022-2023 financial years. The results reveal that size, composition and expertise of board could extremely influence FP positively whereas CEO chair duality could influence negatively. The outcomes of the analyses advocated that firms that comply with good corporate governance practices can expect to achieve higher return on assets and firm performance. It implies that worthy corporate governance applies lead to reduce the various costs inside the organization. Hence, it is concluded that firms of the developing world can possibly enhance their performance by implementing decent corporate governance practices. Therefore, it is desired for firm to separate CEO chair duality to achieve better performance through direct management supervision in Bangladesh.

Board chair gender, glass ceiling, and IPO underpricing: Evidence from China

This paper explores the relationship between board chair gender and IPO underpricing from the perspective of glass ceiling. By employing a large sample of IPOs in China, we find firms with female board chairs (FBCs) have less underpricing than those with male board chairs (MBCs), indicating that investors interpret FBC as a positive signal of IPO. This relationship holds after addressing potential endogeneity concerns by instrumental variable regressions and by propensity score matched sample tests. Further studies show this relationship is more pronounced for firms with more internal gender discrimination, more risk-taking, and CEO-chair duality. In addition, we find firms led by FBCs have better operating performance in post-IPO period, but there is no evidence that firms with FBCs are more conservative in financial reporting or risk-taking. The results suggest that the glass ceiling may create more competent female leaders and investors who bid on firms led by FBCs can benefit from post-IPO operating performance. This paper extends research on underlying factors of IPO underpricing and the impact of gender discrimination in corporate leadership, and has implications for gender structure optimization of top management and IPO pricing efficiency.

Lead Independent Director: Impact on Firm Performance and Financial Misstatements

This paper examines whether the presence of a lead independent director improves firm performance and reduces financial misstatements. Using a sample of Fortune 1000 companies in the year 2013, we find that the effect of lead independent directors on firm performance hinges on CEO –Chair duality. For companies with CEO-Chair duality, the existence of a lead independent director is positively associated with improved firm performance as measured by Tobin’s Q. In contrast, we do not find a similar association for companies separating the CEO and board chair positions. In addition, we do not find an association between the existence of a lead independent director and the likelihood of misstatements. These results suggest that the existence of a lead independent director helps improve a company’s corporate governance.

INTANGIBLE ASSETS AND RESOURCE ALLOCATION: INSIGHTS FROM EUROPEAN COMPANIES

This study aims to explore the nexus between CEO-Chair duality, leverage, and investments in intangible assets within the realm of energy companies listed in the European Union (EU) using multi-theoretical lenses. Robust regression is employed to analyse the panel dataset. Energy companies listed in the European Union are analysed for the period 2011-2020. Findings reveal that leverage and CEO-Chair duality exert a positive influence on investments in intangible assets. By separating the roles of CEO and Chairman and adopting appropriate leverage levels, firms can enhance their ability to invest in intangible assets, fostering innovation and improving their competitive position in the market. The results offer valuable insights for academic researchers, practitioners in the electricity and gas industry and investors, aiding in informed decision-making and resource allocation strategies.

Corporate social responsibility and firm performance nexus: Moderating role of CEO chair duality.

This study aims to explore the link between corporate social responsibility (CSR) and firm performance in the presence of the moderating role of CEO chair duality. It is widely believed that CSR initiatives and firm performance are largely influenced by psychological factors and the behavior of the decision maker (manager/CEO). Hence, CEO chair duality may play an instrumental role in shaping CSR initiatives to enhance firm performance. For empirical investigation, the study used the dynamic panel data method with generalized method of moment (GMM) parameters. The study considered 131 firms listed on the Pakistan Stock Exchange (PSX), yielding 1508 firm-year observations, over the period 2006 to 2020. Our results reveal that the impact of CSR on book-based and market-based measures differs due to the asymmetry of information in the market. The market discounts CEO chair duality due to the concentration of power and translates it into negative impact of CSR on firm performance. Thus, firms should not only improve CSR activities but also take steps to reduce asymmetry in markets because the impact on book-based measures and market-based measures of performance are not consistent. Society should also play a role to convince firms in a better way to take CSR initiatives. The perception of transparency should also be improved as CEO chair duality is being negatively seen by the market.

ANALISA PENGARUH CORPORATE GOVERNANCE TERHADAP MANAJEMEN LABA DAN MARKET EARNING VALUE PERUSAHAAN PROPERTY & REAL ESTATE LQ45 DI BURSA EFEK INDONESIA

This study found that there is a corporate governance effect on earnings management practices in companies on the Indonesia Stock Exchange (IDX) as well as corporate performance messages or signals, especially on accrual opportunities. The results prove significant in limiting earnings management and earnings management as a message or signal of company performance, especially on accrual opportunities. The sample is an industrial company with the most shares on the IDX from 2019 to 2021. The sampling method uses a purposive random sampling method, namely: (1) industrial companies, (2) registered on the IDX and issuing annual financial reports for 2019 to 2021, (3) accounting period on an annual basis, and (4) has data on managerial ownership, institutional ownership, independent audit committee commissioners, and obtained a sample of 7 industrial companies. The sampling method is purposive sampling, which is based on annual financial reports. Good governance has been evaluated on the basis of different practices (directors, multiple directors, ownership management and audit committees) while discretionary accruals have been used as a go-between for estimating malpractice in earnings. This was achieved by using a modified Jones model (Dechow et al., 2018) to obtain results. These empirical findings are consistent with the concept of corporate governance. CEO–chair duality is significantly related to earnings management practices and thus, is noteworthy. Information obtained in this study that there is a correlation with two main areas of research, namely, corporate governance and income manipulation. Explicitly confirming that the company is on the IDX, company administration has an impact on the problem of income manipulation. The importance of this research is enhanced by the prevalence of, so-called, "wars of interest" between minority and controlling shareholders rather than between executives and owners.

CDS contract initiations: REIT board monitoring and corporate decision outcomes

AbstractIn this article, we investigate whether the negative creditor governance shock due to the initiation of credit default swap (CDS) contracts results in monitoring substitution effects between bondholders and shareholders. Using several mechanisms to test increased shareholder monitoring such as board structure, CEO–chair duality, and institutional ownership, we show that shareholder monitoring increases post‐CDS contract initiation. We examine board decision outcomes and show that incentive compensation is higher for real estate investment trusts (REITs) post‐CDS initiation. Furthermore, we find that post‐CDS initiation, REITs undertake more acquisitions that are more likely to be paid for with stocks and take longer to complete than non‐REITs. Finally, we find that REITs industry‐adjusted cash holdings and dividend yield increases post‐CDS initiation.

The effect of good corporate governance on financial distress

This study aims to determine the effect of good corporate governance on financial distress. Corporate governance (independent boards of commissioners, blockholder ownership, CEO-chair duality and board ownership) and financial hardship are being studied on firms listed on the Indonesian Stock Exchange between 2017 and 2019, according to a study. Purposive sampling was utilized by the researchers in this study to collect their data. Information about financial statements and corporate annual reports may be found at www.idxco.in, the primary source. This research includes 30 different firms. Statistical methods such as logistic regression analysis were employed in our investigation. The audit committee, the ceo-chair duality, board ownership, or the independent board of commissioners had no influence on the organization's financial troubles.

Does financial performance moderate the relationship between board attributes and corporate social responsibility in French firms?

PurposeThe purpose of this paper is to study how board attributes impact corporate social responsibility (CSR). In particular, this paper aims to empirically examine the impact of financial performance on the relationship between board attributes and CSR. Board attributes such as board size, board independence, female board representation and CEO-chair duality are included.Design/methodology/approachThis study uses panel data set of 200 French companies listed during 2007–2018 period. The direct and moderating effects were tested by using multiple regression technique.FindingsThe results indicate that significant direct relationships exist among board attributes and CSR. Board independence and female board representation are positively linked with CSR. However, board size and CEO duality are negatively associated with CSR. Findings show, also, that corporate financial performance accentuates significantly the effect of board size, board independence and CEO-duality on CSR, but does not moderate the relationship between female board representation and CSR.Practical implicationsThe findings may be of interest to different stakeholders and policy-makers and regulatory bodies interested in enhancing CG initiatives to strengthen corporate social responsibility because it suggests thinking about implementing a broadly accepted framework of good CG practices to meet the demand for greater transparency and accountability. As an extension to this research, further study can examine the impact of ownership structure and audit quality on CSR issues.Originality/valueThis study extends the dynamic relationship between CG mechanisms and CSR by offering new evidence on how corporate financial moderates this relationship.

The influence of learning and bargaining on CEO–chair duality: Evidence from firms that pass the baton

AbstractSome firms combine CEO and board chair positions after observing CEO performance. We propose that this approach, known as “passing the baton” (PTB), enables the board to learn about the ability and suitability of the CEO before awarding additional title of board chair. Consistent with learning, idiosyncratic stock‐return volatility declines following the CEO–chair combination. The market responds positively (Cumulative Abnormal Return (CAR) = 1.31%) to early promotions, suggesting that early promotions reveal directors’ private information about CEO quality. Compared to a matched benchmark, we observe no decline in firm's accounting performance in subsequent years. Although match‐adjusted stock returns begin to decline 2 years after combination in homogeneous industries, there is no stock‐return decline in heterogeneous industries where learning is more important. The evidence reveals the potential for entrenchment over time, but we find no evidence to suggest that CEO–chair combinations in PTB firms result from agency problems. Our results underscore the importance of balancing both learning and agency problems in corporate governance.

Corporate Governance and Agency Cost: Empirical Evidence from Vietnam

This study examines the impact of corporate governance, reflecting a wide spectrum of board characteristics and ownership structure on agency costs in 281 listed companies on Ho Chi Minh Stock Exchange (HOSE) in Vietnam in the period 2013–2018. For this purpose, three board characteristics were chosen: (1) the size of board of directors, (2) equilibrium between non-executive and executive members of the board of directors, (3) the CEO chair duality and three types of ownership structures were chosen: (1) management ownership, (2) government ownership, (3) foreign ownership. An inverse proxy of agency costs is used: asset utilization ratio (asset turnover), which reflects the managerial efficiency. The research methodology includes three statistical approaches: Ordinary least squares (OLS), fixed effects model (FEM) and random effects model (REM) are considered to employ to address econometric issues and to improve the accuracy of the regression coefficients. The results can create effective corporate governance mechanisms in controlling the managerial opportunistic behavior to lower agency conflicts, and hence lower agency costs.

Board characteristics and earnings management in Sri Lanka

Purpose The purpose of this paper is to examine the association between designated corporate governance attributes and the degree of earnings management in selected quoted companies in Sri Lanka. Design/methodology/approach In total, 70 listed companies in Colombo Stock Exchange (CSE) were selected based on the highest market capitalisation for the period covering from 2015 to 2017 and representing beverage, food and tobacco, diversified, hotel and travel, manufacturing, oil palms and health care sectors, which accounted for 59.9 per cent of the total market capitalisation of CSE. Findings This study found a positive relationship between CEO-Chair duality and earnings management. Practical implications The insights may also provide investors, economic analysts and regulators with early caution indicators of potential problems in a corporation regarding corporate governance failures and aid stakeholders in assessing the effectiveness and efficiency of the board and corporate governance structure and earnings management methods. Originality/value This study extends the extant research on board characteristics and real earnings management by adopting prominent research design and modernised data. This study offers evidence on how selected audit and board committee’s characteristics influence real earnings management practices.

How CEO Power within Boards and TMT Moderate Effect of CEO's International Experience on Firms' Earnings Management

Agency theory pays much attention to CEO-chair duality, an indicator of CEO power within boardroom, and documented board independence- undermining effect for CEO-chair duality. This study distingui...

Impact of Corporate Governance on Earnings Management: Large Sample Evidence from India

The central point of this examination is to research the effect of corporate governance on earning management practices in India. Its results, if proved significant, can thereon be applied to curb earnings management. We utilized random-effect point estimates on 1613 non-Finance organizations working in the Indian subcontinent. The data pans from 2004 till 2018. Corporate governance has been evaluated on the basis of four of its divergent practices (board size, CEO–chair duality, managerial ownership, and audit committee independence) while discretionary accruals have been utilized as an intermediary for estimating malpractices in the income. This has been accomplished by employing the modified Jones model (Dechow et al., 1995) to obtain the results. The empirical findings are in accordance with the concept of corporate governance. CEO-chair duality is significantly connected with practices of earnings management and is thus, noteworthy. However, one of the corporate administration factors, board size, is found irrelevantly identified with earnings manipulation. The examination enhances the current writings on the subject matter; that there is a negative relationship with the two major areas of the study, namely, corporate governance and earnings manipulation. The investigation accords explicitly by confirming that in emerging nations, corporate administration must have a negative impact on the issue of earnings manipulation. The importance of the research is enhanced by the prevalence of the, so called, ‘interest war’ among the minority and controlling shareholder(s) than between the executives and proprietors, in developing countries like India.

Are Passive Investors a Challenge to Corporate Governance?

Corporate governance theories generally suggest that institutional investors could effectively improve the quality of governance through intervention and threat to exit. However, passive institutional investors such as index funds and ETFs lack the ability to exit and may not have strong motivation to intervene, thus lowering the quality of governance of the firms they heavily hold. This paper provides empirical evidence supporting this hypothesis. It shows that higher ownership by passive investors is related to lower firm value measured by Tobin’s Q and weaker operating performance measured by return on assets. Further analysis suggests that passive investors negatively affect several aspects of corporate governance: they exacerbate the managerial myopia problem by discouraging long-term investment, weaken managers’ incentive scheme by lowering the pay-for-performance sensitivity and the probability of performance-based disciplinary turnover, and reduce the independence of the board by raising the probability of CEO-chair duality.

The Role of Ownership and Governance Structure in Raising Capital: An International Study

This paper investigates whether the ownership and the governance structure of firms affects the decision to raise funds, and subsequently the choice of the capital instrument. We hypothesize that the choice of capital instrument depends on the relative riskiness of the source of funds ranging from equity to debt finance including bonds, sukuk or bank loans. Using a sample from 2000-2015 of 1,565 firms from countries including Malaysia, Indonesia, Singapore and Pakistan, we find the evidence that ownership concentration is associated with higher control motives and restricts equity financing to avoid ownership dilution. CEO-Chair duality also coincides with fewer instances of raising external funds and relative risk sharing. On the other hand, lower information asymmetry, observed by analyst coverage and firm size, generally accompanies more issuances of debt-like products, such as bank loans and bonds. Finally, some of the prominent financial ratios such as market-to-book value, leverage and macroeconomic factors significantly drive firms in their decision to raise funds and share risk.

Corporate Governance and Earnings Management: A Case of Karachi Stock Exchange Listed Companies

The prime aim of this study is to investigate the impact of corporate governance practices on earnings management. We employed fixed effect estimators on a sample of 89 non-financial companies listed on KSE (Karachi Stock Exchange), for the period 2003–2012. Corporate governance has been quantified through its four different practices (namely, board size, managerial ownership, CEO–chair duality, and audit committee independence) whereas discretionary accruals have been used as a proxy for measuring earnings management and are calculated through modified Jones model developed by Dechow, Sloan and Sweeney (1995). The empirical findings are quite in line with the philosophy of corporate governance. Audit committee independence and earnings management are negatively correlated. Similarly, CEO–chair duality is positively associated with earnings management. However, two of the corporate governance variables (i.e., board size and managerial ownership) are found insignificantly related to earnings management. The study contributes in general to the existing literature on corporate governance and earnings management by examining their relationship; that corporate governance is negatively associated with earnings management. The study contributes specifically by evidencing that in developing countries like Pakistan, where the interest war is more prominent among the minority shareholder and controlling shareholders than among management and owners, corporate governance is playing an effective role to overcome these problems.

Does Combining the CEO and Chair Roles Cause Firm Performance?

We use over 22,000 firm-year observations from 1995-2010 to investigate whether combining roles of CEO and board-chair causes poor performance. Our research design allows us to reconcile disagreement in the literature about whether CEO-chair duality impacts shareholder value. CEOs are awarded the additional title of board-chair following superior firm performance. A naive analysis indicates a drop in firm performance following CEO promotion to chair. However, a research design that controls for the propensity to combine roles and performance mean-reversion reveals no post-appointment underperformance. Consistent with a learning explanation, investors react positively to combining both roles early in CEO’s tenure, but exhibit no reaction to combinations later in CEO’s tenure. Increases in post-combination compensation are unrelated to proxies for managerial power. Overall, there is no evidence that combining the CEO-chair positions hurts shareholder interests.

Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks

The performance and accountability of boards of directors and effectiveness of governance mechanisms continue to be a matter of concern. Focusing on differences between conventional banks and Islamic banks, we examine the effect of (i) Shari’ah supervision boards, (ii) board structure and (iii) CEO-power on performance during the period 2005–2011. We find Shari’ah supervision boards positively impact on Islamic banks’ performance when they perform a supervisory role, but the impact is negligible when they have only an advisory role. The effect of board structure (board size and board independence) and CEO power (CEO-chair duality and internally recruited CEO) on the performance of Islamic banks is overall negative. Our findings provide support for the positive contribution of Shari’ah supervision boards but also emphasize the need for enforcement and regulatory mechanism for them to be more effective.

Chairman Change in Family and Non-Family Firms: The Evidence of Founder Succession from Entrepreneurial Firms

We analyze factors that affect chairman change and succession performance of Taiwanese firms. Our results show that firms with better performance, firms with CEOchair duality, and family firms have a low probability of chairman change. On the other hand, firms that engage in mergers and acquisitions or possess a large board size have a high probability of chairman change. Chairman succession in family firms occurs when firm performance is favorable. Our results show that the performance of family firms with the chairman position taken over by relatives is lower than that of family firms without chairman replacement.