Ceo duality and firm performance-an endogenous issue

Abstract

Whether dual CEO leadership structure is better for corporations is one of the most hotly debated issues in corporate finance. This paper uses a recent data to re-examine the relationship between CEO duality and firm performance, controlling for other important variables such as firm characteristics, ownership structure, CEO compensation, and agency costs. We find a recent trend of increased number of firms converting from dual to non-dual CEO structure. However, our empirical results do not show a significant relationship between CEO duality and firm performance nor improvement in firm performance after change in leadership structure. We find evidence of endogeneity, and we attribute the insignificance of the relationship between CEO duality and firm performance to the possibility that CEO duality is endogenously and optimally determined given firm characteristic and ownership structure.