Chief Executive Officer Duality Research Articles

CEO attributes and borrowing costs: exploring the moderating role of financial literacy

ABSTRACT This study examines the effect of Chief Executive Officer (CEO) attributes on borrowing costs and the moderating role of the CEO’s financial literacy on this relationship. We employed 2926 firm-year observations of non-financial firms listed on the Pakistan Stock Exchange. We used ordinary least squares regression to test the hypotheses and further employed fixed effect analysis, generalized method of moments estimation and two-stage least squares analysis to resolve the possible endogeneity concerns. Our empirical results indicate that CEO age, tenure, ownership and gender are negatively associated with borrowing costs, whereas CEO duality is positively associated with borrowing costs. Furthermore, we report that a financially literate CEO strengthens the relationships in the cases of age, tenure, ownership and gender while it weakens the relationship in the case of CEO duality. Our results provide novel evidence in this context and extend empirical support to upper echelons theory in the case of an emerging economy.

Does corporate governance influence environmental, social and governance disclosure practices of state‐owned enterprises? An international study

AbstractThis paper provides fresh insights into the impact of corporate governance mechanisms on environmental, social and governance (ESG) disclosure practices of state‐owned enterprises (SOEs). To accomplish this study's research objective, we collected ESG and corporate governance data from Refinitiv Eikon's database on a balanced sample of 253 SOEs from 37 worldwide countries over 5 years (2018–2022), obtaining a total of 1265 observations. A battery of fixed and random effects panel regression models has been estimated to test the impact of board characteristics, like board size, board independence, board gender diversity, number of board meetings, Chief Executive Officer (CEO) duality and the presence of a corporate social responsibility (CSR) committee, on overall and individual ESG disclosure scores of sampled SOEs. Results show that while board size and CEO duality negatively affect SOE ESG disclosure, board independence and gender diversity, as well as the number of board meetings and the existence of a CSR committee, exert a positive influence.

Strategic turnaround: unraveling the impact of CEO power on firm performance during retrenchment

Purpose This paper aims to investigate the impact of retrenchment strategy on firm performance in the context of Pakistani firms while considering the moderating role of chief executive officer (CEO) power. By examining the influence of CEO duality and CEO share ownership on the relationship, this study contributes to strategic management and corporate governance knowledge within the Pakistani business environment. Design/methodology/approach A quantitative approach was used to analyze the relationship using data from annual financial statements. The sample consisted of 76 companies from the KSE-100 index from the year 2015 to 2020. Random effects regression models were used, along with hierarchical regression to explore the moderating effect of CEO power. Findings The findings demonstrate that the implementation of a retrenchment strategy positively impacts firm performance in Pakistani firms. The study also reveals that CEO power plays a crucial role in strengthening the relationship between retrenchment strategy and firm performance. Moreover, the study highlights the importance of considering the temporal sequence, size and age of firms when examining the impact of CEO power and retrenchment strategy on firm performance. Research limitations/implications The study enhances the understanding of the contingent nature of retrenchment strategies and the influence of CEO power in the Pakistani business context. Practically, the research contributes to strategic management and corporate governance dynamics, facilitating the development of strategies that enhance firm performance and sustainability in Pakistan. Originality/value This research provides original insights by specifically focusing on the Pakistani context and analyzing the interplay between retrenchment strategy, CEO power and firm performance. The study adds to the limited literature on the relationship between retrenchment and performance in the Pakistani business environment. Additionally, it highlights the significance of CEO power as a critical factor in determining the success of retrenchment.

Does a co‐opted director affect a firm's financial distress risk?

AbstractThis study examines the relationship between co‐opted directors (CODIR), measured as the fraction of directors appointed after the Chief Executive Officer (CEO) assumes office to board size, and firms' financial distress risk (FFDR). Understanding the relationship between CODIR and FFDR is imperative due to the significant impact of high risk‐taking on financial crises and the heightened expectations placed on board members for risk oversight. Despite growing research on corporate governance and FFDR, little attention has been paid to the role of CODIRs, presenting a significant gap in the literature. Using a US sample from 1996 to 2019, covering 13,486 firm‐year observations, we document that CODIR reduces FFDR, supporting the hypothesis that co‐opted directors have a lower financial distress risk‐taking propensity than their non‐co‐opted counterparts. We also find that a critical mass of at least three CODIRs and independent CODIRs reduces FFDR. Our results also document that CEO power in the form of CEO duality and CEO tenure, external monitoring in the form of the number of analysts following the firm, competition, and takeover susceptibility do not drive our main conclusions for co‐option and FFDR. Finally, the results show that CODIR reduces FFDR through liquidity channels. The findings remain robust to various definitions of co‐option and distress risk, and are consistent in both difference‐in‐differences analysis and propensity score matching.

Intellectual capital efficiency: the missing piece to your corporate governance and profitability puzzle

PurposeThe purpose of this study is to evaluate the synergy of corporate governance (CG) with intellectual capital (IC) and to assess the moderating effect of profitability indicator on the aforementioned synergy using agency theory, resource-based view theory and theory of financial ratios as conceptual frameworks.Design/methodology/approachThe sample includes 72 companies with a six-year data set drawn from the KSE 100 Index companies of Pakistan. In addition, the study adopts Pulic’s model to compute the efficiency of IC. The research uses fixed-effect panel regression for analysis and two-stage least squares regression (2SLS) to address endogeneity issues in the estimation process.FindingsThe results showcased that chief executive officer duality possesses negligible impact on IC efficiency (ICE), while independent directors, audit committees and board size tend to attain a strong association with IC. Moreover, it postulates that the moderation of return on equity strengthens the path between all governance components and ICE significantly.Originality/valueThe research uses a 2SLS regression analysis to explore how CG practices take hold on the effectiveness of IC in Pakistan while taking into account the moderating impact of profitability. The findings add to the body of knowledge on the value that strong governance practices have on businesses and society.

Corporate cash holdings and financial performance: moderating effect of corporate governance and family ownership

PurposeThis study aims to examine the effect of corporate cash holdings on financial performance. Additionally, it investigates the moderating effect of corporate governance and family ownership on the link between corporate cash holdings and financial performance.Design/methodology/approachThis study uses secondary data regarding the sample of 81 firms listed in the Karachi Stock Exchange (KSE) 100 index from 2011 to 2020. The present study applies the system generalized method of moments (GMM) to estimate the dynamic financial performance models.FindingsThe findings reveal that corporate cash holding is significantly positively linked with financial performance. Further, the findings indicate that the board size and chief executive officer (CEO) duality strengthen the association between cash holdings and financial performance, whereas CEO gender and family ownership weaken the positive effect of cash holdings on financial performance. Furthermore, the findings suggest that Covid-19 significantly negatively affected the financial performance of Pakistani firms.Practical implicationsThe findings have several policy implications. First, policymakers need to increase the board of directors' role in observing the firms' cash-holding behaviour. Policymakers may also formulate policies providing stronger protection for minority shareholders from majority shareholders.Originality/valueTo the best of the authors' knowledge, this study is the first to examine how corporate governance and family ownership influence the link between corporate cash holdings and financial performance in the context of Pakistan.

How Much Does Nonprofit Board Governance Matter? Role of Interlocking Directorates, Executive Power, and Women on Boards in Executive Compensation

This article develops an executive compensation model focusing on board governance structure in nonprofit organizations. Drawn from a panel of nonprofits in three Upstate New York cities from 1998 to 2014, the analysis shows that chief executive officers (CEOs) compensation is positively associated with interlocking directorships of CEOs and boards of directors. The results reveal that the executives enjoy more compensation when they serve on the boards of other nonprofit organizations, hold more power in a leadership position with CEO duality and longer tenure, and when the organizations are led by busy boards where a majority of members in the boardroom sit on the boards of multiple other nonprofits. The analysis further shows that financial rewards offered to the executives are contingent upon women’s representation in the boardroom. These findings suggest board governance composition plays a critical role in executive compensation. Implications for practice and future research are discussed.

Board Composition and Cash Hoarding: Evidence from Jordanian Small- and Medium-Sized Enterprises

This study examines the influence of board composition on cash hoarding in Jordan. Based on a sample of 24 small and medium-sized enterprises (SMEs) between 2010 and 2020, the results show that board size has a positive impact on cash hoarding, whereas board independence has a significant negative influence on cash hoarding. Importantly, we note that cash hoarding is not affected by either chief executive officer (CEO) duality or female directors, contradicting the idea that women are risk-averse when making financing decisions. Regarding the other explanatory variables, the results reveal that firm size and operational risk have a significant and negative effect on cash hoarding, whereas growth opportunities have a positive and significant impact on cash hoarding. Finally, cash hoarding is not affected by cash flows. The results remain robust after addressing the endogeneity problem, and they enrich the literature with new evidence of the influence of female directors on cash hoarding in Jordan, where female board representation is low. Furthermore, the results provide evidence of the role of CEO duality on boards of directors, an issue that regulatory bodies in Jordan should consider when planning future governance reforms. Subjects: Quantitative finance, corporate finance, business, management, and accounting.
 
 Received: 9 July 2023 / Accepted: 18 November 2023 / Published: 5 January 2024

CEO power and stock price crash risk in India: the moderating effect of insider trades

PurposeThis study aims to explore the relationship between chief executive officer (CEO) power and stock price crash risk in India. Furthermore, it seeks to analyse how insider trades may moderate the impact of CEO power on stock price crash risk.Design/methodology/approachA study of 236 companies from the S&P BSE 500 Index (2014–2023) have been analysed through pooled ordinary least square (OLS) regression in the baseline analysis. To enhance the results' reliability, robustness checks include alternative methodologies, such as panel data regression with fixed-effects, binary logistic regression and Bayesian regression. Additional control variables and alternative crash risk measure have also been utilised. To address potential endogeneity, instrumental variable techniques such as two-stage least squares (IV-2SLS) and difference-in-difference (DiD) methodologies are utilised.FindingsStakeholder theory is supported by results revealing that CEO power proxies like CEO duality, status and directorship reduce one-year ahead stock price crash risk and vice versa. Insider trades are found to moderate the link between select dimensions of CEO power and stock price crash risk. These findings persist after addressing potential endogeneity concerns, and the results remain consistent across alternative methodologies and variable inclusions.Originality/valueThis study significantly advances research on stock price crash risk, especially in emerging economies like India. The implications of these findings are crucial for investors aiming to mitigate crash risk, for corporations seeking enhanced governance measures and for policymakers considering the economic and welfare consequences associated with this phenomenon.

Chief executive officer duality and the relationship between firm performance and dividend payouts

Using a panel of data on manufacturing firms listed on the Chinese stock exchange over the period 2017 to 2022, this research paper empirically investigates the relationship between firm performance and dividend payouts. Unique features of Chinese financial markets allow us to contribute to the literature on how corporate governance, in particular concentrated managerial power and state ownership, affects agency costs and therefore the relationship between firm performance and dividend payouts (Burdeos, 2021; Debnath et al., 2022; Vicente, 2020). The main findings of this study are as follows. Firms follow the pecking order theory when funding their capital needs: firms wait for dividends, preferring to take advantage of profitable investment opportunities when firm performance is good. This negative relationship between firm performance and dividend payout is even stronger at firms with highly concentrated managerial power as indicated by chief executive officer (CEO) duality. However, state-owned enterprises, which face a double principal–agent problem that cannot be fully addressed by CEO duality, demonstrate a weaker negative relationship between firm performance and dividend payouts. We find evidence that the negative relationship between firm performance and dividend payouts strengthened during the COVID-19 pandemic: firms were even more likely during to prefer internal financing during the pandemic years.

COVID-19 pandemic and firm performance in emerging market: The role of corporate governance

The agent is granted decision-making authority over the company’s operations to achieve the principal’s objectives (Jensen & Meckling, 1976). However, the existence of the COVID-19 pandemic makes companies get higher risks that have an impact on company performance. The board consisting of board size, board independence, women on board, and chief executive officer (CEO) try to maintain the company’s performance during COVID-19. The purpose of this study is to analyze the role of corporate governance which consists of board size, board independence, women on board, and CEO duality on company performance during the COVID-19 period. The sample of this study is 538 companies listed on the Indonesia Stock Exchange (IDX). The results of this study indicate that COVID-19 has had an impact on decreasing the company’s performance. Then, we also found that board size has a significant positive effect on company performance during the COVID-19 pandemic, while board independence, women on board, and CEO duality do not have a significant effect. Then, we interacted with COVID-19 on the company’s performance. The results of our research showed that board size, women on board, and CEO duality have a significant positive effect on company performance. These results have implications that corporate governance has a very important role in boosting the performance of companies that are under pressure due to the COVID-19 pandemic.

Corporate Governance and Ethical Practice in the Nigerian Financial Sector

This study investigated corporate governance and ethical practice in the Nigerian financial sector. The study specifically examined the influence of corporate governance measured by audit committee, board composition, board size and Chief Executive Officer Duality on accountability and transparency and the relationship between corporate governance and ethical practice in the Nigerian financial sector. This study used a descriptive survey research design. The population of the study consists of 102 employees of Pension Fund Administration Companies (Leadway Pensure and ARM Pension) in Ondo and Ekiti States. However, due to the size of the population and the accessibility of the respondents, 50 respondents were chosen at random from the population, including 25 employees of Leadway and 25 employees of ARM. Data for the study were gathered using a self-created survey called the “Corporate Governance and Ethical Practice in the Nigerian Financial Sector” (CGEPNFC). Three null hypotheses were generated and tested at the significance level of 0.05. Data were analyzed using inferential statistics such as correlation and simple regression analysis. The study’s findings revealed corporate governance significantly influenced accountability and transparency. Also, the study revealed a positive correlation between corporate governance and ethical practice in the Nigerian financial sector. Based on the findings, the study recommended that Regulatory bodies, including the SEC and CBN, should increase their efforts to monitor and enforce corporate governance standards. Also, Organizations should invest in training programmes to instill ethical behavior in their employees.

Decoding tax management: The role of corporate governance mechanisms

While tax pressure remains a major concern in corporate management, it is legitimate to ask whether tax has always been among the core factors of corporate governance (Chytis et al., 2020). This study aims to examine the influence of corporate governance on tax management practices within Moroccan firms listed on the Casablanca Stock Exchange (CSE). Focusing on three dimensions of corporate governance — board composition, audit committee structure, and external audit quality — we employed multiple regression analysis on data spanning 2014–2019 from a sample of 48 listed firms, totaling 288 firm observations. Significantly, board size, chief executive officer (CEO) duality, and external audit quality are found to be pivotal factors shaping tax management practices. Other corporate governance variables, notably the independence of the board of directors and the structure of the audit committee, do not appear to exert a significant influence on the tax management of listed Moroccan companies. Our study is one of the few to have addressed the issue of tax management in the Moroccan context. Moreover, it may also serve as a fundamental resource for researchers exploring the complex dynamics of tax practices in the organizational context.

Earnings management and corporate governance during COVID-19: Evidence from the European capital market

The objective of this paper is to analyse the impact of COVID-19 on the earnings manipulation of firms and whether corporate governance has a mitigating effect. The methodological approach consists of two steps: in the first stage, a pooled ordinary least squares (OLS) regression model has been implemented to compute the earnings management proxies, whereas in the second stage panel data regression analysis has been adopted to test the effects of corporate governance variables on the earnings management proxies themselves. Using data from STOXX Europe 600 as a proxy for the European capital market, it is found that the level of companies’ earnings manipulation increased during the pandemic. In particular, companies have engaged in more accounting and real earnings management (REM) practices. The findings show that a larger board helps to mitigate the positive relationship between COVID-19 and earnings manipulation, whereas no mitigating effect for board independence, board diversity and chief executive officer (CEO) duality has been found. In addition, an industry analysis has been developed both for robustness purposes and in order to check which sectors have been most and least affected by the pandemic. In particular, the findings show how the most affected industries reported a higher level of earnings management, resulting in a worse reporting quality. This paper provides additional evidence on the impact of COVID-19 on earnings management using a strong multi-country level governance setting. The results of this study provide useful suggestions for business practice, investors and policymakers.

Adapting Corporate Governance for Sustainable Organizational Performance: A Case Study of the Banking Sector in Pakistan amid the COVID-19 Pandemic

Purpose - Corporate governance is a crucial aspect of creating a corporate culture that emphasizes transparency, fairness, and openness. The COVID-19 pandemic has caused a global financial crisis, which has increased attention to corporate governance issues. In light of this, the objective of this study is to examine the impact of corporate governance on the sustainable organizational performance of the banking sector in Pakistan particularly in the context of COVID-19.
 Study Design/Methodology/Approach - This research analyses the annual reports of sample banks and uses secondary data from 2016 to 2022; therefore, there is no doubt about the reliability and validity of the data. This study measured firm sustainable financial performance based on accounting data, using return on assets, return on equity, and earnings per share. The suggested model was investigated by the generalized method of moments through the Arellano-Bond Dynamic Panel-Data estimator.
 Findings - The overall findings of the study reveal that corporate governance components such as board size, audit committee independence, number of board meetings, and chief executive officer duality have a significant impact on organizational performance. Furthermore, the Fixed Affect model indicates that CEO duality has no discernible effect on organizational sustainable performance, while board size, audit committee independence, and the frequency of board meetings all positively affect it.
 Practical and theoretical implications- This study has implications for all stakeholders of the banking system, economic policymakers, and academicians by highlighting the importance of components of corporate governance that enhance overall organizational performance. Theoretically, compliance with corporate governance regulations should lower agency costs, which will improve the overall business's performance now and in the future.
 Originality/Novelty- This study indicates that the use of corporate governance practices enhances and improves the overall sustainable performance of the banking sector. This study adds value to the existing body of literature by considering corporate governance and its association with organizational performance, particularly from the COVID-19 perspective.

Effect of board structure on stakeholders’ centric perspective of sustainable corporate world

Purpose Corporate leadership and environmental, social and governance (ESG) performance are closely intertwined, as effective corporate leadership can facilitate the achievement of strong ESG performance. Thus, the purpose of the study is to investigate the impact of corporate board leadership on the ESG performance of listed firms. Design/methodology/approach The sample has been taken from the listed firms of the Nifty 500 index spanning the period of 10 years from 2012 to 2022. Dynamic panel data estimations are applied through a fixed effect model. Findings The findings of this study revealed that board size, board independence and board qualification have a significant positive influence on ESG performance. It is evident that good corporate governance practices can positively influence ESG performance by fostering accountability, transparency and ethical behavior, as well as better integrating ESG considerations into their decision-making processes and ensuring that ESG issues are prioritized at the highest levels of management. Further findings also revealed that chief executive officer (CEO) duality has a significant negative relationship with ESG performance, which goes against the belief of stakeholder theory. Social implications It has practical implications for policymakers, as they can enact new regulations pertaining to the CEO’s position in the organizations to make corporate governance responsible for improved sustainability and ESG performance. Originality/value There are very few studies analyzing the impact of corporate board structure on ESG performance related to emerging markets. Thus, this study contributes to that literature by using the methodology GMM panel data for the first time as per our knowledge

Microplastics in aquatic bodies: Assessing the role of governance mechanisms in industrial wastewater management

The purpose of this research is to examine the association between corporate governance mechanisms (board independence, board gender diversity, Chief Executive Officer (CEO) duality, and environmental, social and governance (ESG) linked compensation) and wastewater recycling as a strategy for managing the flow of microplastics into the aquatic environment. The study analysed an international sample of top companies on the Forbes 500 list over a 15-year period during the millennium development goals (MDGs) and sustainable development goals (SDGs) eras. Multiple regression analysis with fixed effect OLS, two-stage least squares regression, propensity score matching, and logistic regression were applied in the data analysis. The results show that, at the aggregate level, board gender diversity is positively associated with wastewater recycling, whilst CEO duality has a significant negative impact. When disaggregated into industries, board gender diversity is positively associated with wastewater recycling in high-polluting and low-polluting industries. In relation to the MDGs/SDGs eras, the impact of board gender diversity is more significant in the MDGs era than in the SDGs era. At the geographical region level, CEO duality has a significant negative impact on wastewater management in the America and Asia Pacific regions, whilst the effect of CEO duality is significantly positive in the Western Europe region. We also find that a minimum of two female directors is required to improve wastewater management practice. The study concludes that whilst board gender diversity is a notable driver of wastewater management, CEO duality diminishes the commitment of multinational entities (MNEs) to addressing wastewater management issues. Our result is robust to (i) alternative measures of wastewater management, (ii) alternate sample composition, (iii) alternate method of data analysis, and (iv) endogeneity checks. The study contributes to the limited literature on waste management and the circular economy, particularly governance mechanisms’ role in wastewater management in an international context.

Female ownership and female directors’ moderating role as corporate governance monitoring mechanisms in increasing the value of Thai family-owned firms

PurposeThe phenomenon of “broken rungs” has prevented most women from attaining managerial positions relative to men. Despite this gender disparity in management, female executives are more likely to enhance shareholder trust due to higher ethical standards, which can be hypothesized to mitigate the negative impact of family ownership on firm value. Therefore, this study aims to investigate the moderating role of female ownership and female directors in mitigating the unfavorable effects of family ownership on firm value as measured by Tobin’s Q and the Market Value of Equity (MVE).Design/methodology/approachMultiple linear regression is applied to examine the proposed hypotheses, as well as other vital factors, such as board independence (BI), the dual chief executive officer (CEO)–chairman role (CEO duality) and control variables (i.e. firm size, firm age, leverage and investment ratio).FindingsThe results revealed that female directors could buffer the negative impact caused by family ownership, leading to higher firm value, when given a sufficient level of female ownership or the appointment of more female directors, regardless of female ownership levels. Otherwise, female ownership cannot help overcome the negative effects of family ownership in Thai-listed firms. This study also sheds light on corporate governance elements that impact firm value. CEO duality reduces the value of Thai-listed companies, whereas board independence increases firm value.Practical implicationsThe managerial roles for women should be promoted in Thai-listed enterprises. The government can support new laws, policies and programs for embracing a cross-cutting gender perspective. Female network initiatives enable women to advance in their managerial careers.Originality/valueTo the best of the authors’ knowledge, this study intends to fill the research gap by investigating how female directors and owners can moderate family ownership’s influence on the value of firms listed on the Stock Exchange of Thailand (SET), which is one of the emerging capital markets.

Analysis of Corporate Governance Practices on Financial Performance of Foreign Banks in Kenya: A Case of Standard Chartered Bank

The study analysed the effects of corporate governance on the financial performance of foreign banks in Kenya. The specific objectives of this study were to: examine the effect of board size on financial performance of foreign banks in Kenya, to establish the effect of Chief Executive Officer duality on financial performance of foreign banks in Kenya and evaluate the effect of board composition on financial performance of foreign banks in Kenya. The main theories for this study were the agency theory and stewardship theory. Descriptive design was used by the study. Stratified sampling was employed as the sample method in the study. A total of 176 participants was analyzed in this investigation, and the sample size consisted of 122 participants. The research methodology primarily relied on gathering data through primary research. A well-designed questionnaire was used to collect information from the target audience. Data was cleaned, coded and analyzed. The study made use of both descriptive and inferential statistics. Findings indicated a positive and significant association between board size and financial performance of foreign banks in Kenya (β =0.233, p < 0.05). There was a positive and significant relationship between Chief Executive Officer duality and financial performance of foreign banks in Kenya (β =0.371, p < 0.05). The link between board composition on financial performance of foreign banks in Kenya was positive and significant (β =0.451, p < 0.05). The study concludes that effective communication between the board of directors and the executive management team is vital for a company's financial performance. The size of a board of directors can directly affect how decisions are made within the organization. Skills, knowledge and experience of board members are foundational to their ability to effectively oversee the organization's operations and strategic direction. The study recommends that foreign banks in Kenya should ensure the right number of people who serve on the board of directors. The banks should have a policy on Chief Executive Officer duality as it helps enhance the financial performance. It is recommended that foreign banks board members should possess the right skills, knowledge and experience that would help to effectively oversee the organizations’ operations and strategic direction.

Board leadership structure and human capital disclosure: Role of independent directors

This study investigates board characteristics, including board leadership structure, which explain the human capital disclosure (HCD) provided by companies. It uses a self-constructed disclosure index to quantify the level of human capital information using content analysis. Generalized method of moment is employed to estimate a dynamic model of the relationship between HCD and the characteristics of boards of directors. The results show that companies are adapting to the new European Union (EU) Regulation Directive 2014/95/EU by increasing their HCD. There has been a change in the topics disclosed by companies that signal a commitment to social responsibility toward their employees and stakeholders. The level of HCD is significantly associated with board leadership structure, and independent directors play a moderating role when a chief executive officer (CEO) duality exists. Additionally, factors such as gender diversity, board size, board activity, company size and age, and the EU Directive approved in 2014 are all associated with HCD. This study enriches the debate on the role of independent directors in HCD because they can exercise a moderating role when CEO duality is present.