The contextual factors behind CEO duality: an empirical analysis of Brazil's case
Keywords:
CEO Duality. Board of Directors. Corporate Governance. Stewardship Theory.Abstract
Our econometric analyses used logistic regression to test the relation between CEO duality, a dummy variable equal to one if there is duality and 0 otherwise with independent variables regarding firm characteristics (firm age, size and economic sector), corporate governance (ownership structure, CEO age and governance level), and firm economic and financial performance. Our sample consisted of a balanced panel of 160 Brazilian publicly traded companies listed on B3 S.A., with data from 2010 to 2016. Our results indicate that CEO duality was positively related with higher CEO age and superior financial performance. Conversely, CEO duality was negatively related with firm size, belonging to special listing segments, belonging to regulated sectors, board size and foreign capital ownership. Our results are robust to different specifications and different econometric techniques.
Downloads
References
AMARAL-BAPTISTA, M. A.; KLOTZE, M. C.; MELO, M. A. C. CEO Dua-lity and Firm Performance in Brazil: Evidence from 2008, Revista Pensamento Contemporâneo em Administração, v. 5, n. 1, p. 24-37, 2011.
BRICKLEY, J. A.; COLES, J. L.; JARRELL, G. Leadership structure: Sepa-rating the CEO and chairman of the board. Journal of Corporate Finance, v. 3, n. 3, p. 189-220, 1997.
CVM. Comissão De Valores Mobiliários, Recomendações da CVM sobre governança corporativa, 2002. Available at < http://www.cvm.gov.br>. Ac-cess date: Ago 1, 2016.
DALTON, D. R.; DALTON, C. M. Integration of micro and macro studies in governance research: CEO duality, board composition, and financial perfor-mance. Journal of Management, v. 37, n. 2, p. 404-411, 2011.
DALTON, D. R.; RECHNER, P. L. On the antecedents of corporate severance agreements : an empirical assessment. Journal of Business Ethics, v. 8, n. 6, p. 455-462, 1989.
DAVIS, J.; SCHOORMAN, F.; DONALDSON, L. Toward a Stewardship Theory of Management. Academy of Management Review, v. 22, n. 1, p. 47–74, 1997.
DEY, A.; ENGEL, E.; Liu, X. CEO and board chair roles: To split or not to split? Journal of Corporate Finance, v. 17, n. 5, p. 1595–1618, 2011.
DONALDSON, L.; DAVIS, J. Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Manage-ment, v. 16, n. 1, p. 49–64, 1991.
ECONOMATICA. Available at < http://www.economatica.com/pt/>. Access date: February, 2017.
EISENHARDT, K. M. Agency Theory: An Assessment and Review. Acade-my of Managwement Review, v. 14, n. 1, p. 57-74, 1989.
ELSAYED, K. Does CEO duality really affect corporate performance? Cor-porate Governance: an International Review, v. 15, p. 1203–1214, 2007.
ELSAYED, K. A Multi-theory Perspective of Board Leadership Structure: What Does the Egyptian Corporate Governance Context Tell Us? British Journal of Management, v. 21, n. 1, p. 80–99, 2010.
FAMA, E. F.; JENSEN, M. C. Separation of ownership and control separation of ownership and control. Journal of Law and Economics, v. 26, n. 2, p. 305–360, 1983
FALEYE, O. Does one hat fit all? the case of corporate leadership structure. Journal of Management and Governance, v. 11, n. 3, p. 239–259, 2007.
FINKELSTEIN, S.; D’AVENI, R. A. CEO duality as a double-edged sword: how boards of directors balance entrenchment avoidance and unity of com-mand. Academy of Management Journal, v. 37, n. 5, p. 1079–1108, 1994.
HART, O. Corporate governance: some theory and implications. The economic journal, v. 105, n. 430, p. 678-689, 1995.
IBGC. Código das melhores práticas de governança corporativa, 2003. Disponível em < http: //www.Ibgc.org.br>. Access date: Sep 20, 2012.
JENSEN, M.; MECKLING, W. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, v. 3, n. 4, p. 305-360, 1976.
KRAUSE, R.; SEMADENI, M.; CANNELLA, A. A. CEO duality: a review and research agenda. Journal of Management, v. 40, n. 1, p. 256–286, 2014.
LA PORTA, R.; LOPEZ-DE-SILANES, F.; SHLEIFER, A.; VISHNY, R. Investor protection and corporate governance. Journal of financial economics, v. 58, n. 1, p. 3-27, 2000.
LINCK, J. S.; NETTER, J. M.; YANG, T. The determinants of board structure. Journal of Financial Economics, v. 87, n. 1, p. 308–328, 2008.
MARIANO, B.; FERREIRA, D.; FERREIRA, M. Creditor Control Rights and Board Independence. Journal of Finance, 2017.
MICHAEL, S. C.; PEARCE, J. A. Choosing constraints as a third solution to agency. Journal of Management Studies, v. 41, n. 7, p. 1171-1197, 2004.
PALMON, O., WALD, J. K. Are two heads better than one? The impact of changes in management structure on performance by firm size. Journal of Corporate Finance, v. 8, n. 1, p. 213–226, 2002.
PREVOST, A. K.; RAO, R. P.; HOSSAIN, M. Determinants of board compo-sition in New Zealand: A simultaneous equations approach. Journal of Empir-ical Finance, v. 9, n. 4, p. 373–397, 2002.
RECHNER, P. L.; DALTON, D. R. Research notes and communications CEO duality and organizational performance: a longitudinal analysis. Strategic Management Journal, v. 12, n. 2, p. 155–160, 1990.
REDIKER, K. J.; SETH, A. Boards of directors and substitution effects of alternative governance mechanisms. Strategic management journal, v. 16, n. 2, p. 85-99, 1995.
SILVEIRA, A. M.; BARROS, L. A. B. C.; FAMÁ, R. Estrutura de governança e desempenho financeiro nas companhias abertas brasileiras: um estudo empírico. Caderno de Pesquisas em Administração, v. 10, n. 1, p. 57-91, 2003.
SILVEIRA, A. M.; PEROBELLI, F. F. C.; BARROS, L. A. B. C. Governança Cor-porativa e os Determinantes da Estrutura de Capital: Evidências Empíri-cas no Brasil. RAC - Revista de Administração Contemporânea, v. 12, n. 3, p. 763–788, 2008.
STREBEL, P. The case for contingent governance. MIT Sloan Manage-ment Review, v. 45, n. 2, p. 59, 2004.
SUNDARAMURTHY, C.; LEWIS, M. Control and collaboration: paradoxes of governance, Academy of Management Review, v. 28, n. 3, p. 397–415, 2003.
VALADARES, S. M.; LEAL, R. P. C. Ownership and control structure of Brazilian companies. Revista Abante, v. 3, n. 1, p. 29–56, 2000.
VANCIL, R. F. Passing the Baton: Managing the Process of CEO Succession, (1st ed.). Boston: Harvard Business School Press, 1987.
WARD, A. J.; BROWN, J. A.; Rodriguez, D. Governance bundles, firm per-formance, and the substitutability and complementarity of governance mechanisms. Corporate Governance: An International Review, v. 17, n. 5, p. 646-660, 2009.
WEIR, C.; LAING, D. Ownership structure, board composition and the market for corporate control in the UK: an empirical analysis. Applied Economics, v. 35, n. 16, p. 1747-1759, 2003.
YANG, T.; ZHAO, S. CEO duality and firm performance: Evidence from an exogenous shock to the competitive environment. Journal of Banking and Finance, v. 49, p. 534–552, 2014.
ZAJAC, E. J.; WESTPHAL, J. D. The costs and benefits of managerial incen-tives and monitoring in large US corporations: When is more not better? Strategic management journal, v. 15, n. S1, p. 121-142, 1994.
