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CEO duality and firm performance during the 2020 coronavirus outbreak

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  • Hassan, M. Kabir
  • Houston, Reza
  • Karim, M.Sydul
  • Sabit, Ahmed

Abstract

Stewardship theory suggests that CEO duality can provide strong leadership and facilitate the development and coordination of firm strategy. These benefits should affect firm risk and financial performance, particularly when the firm has high information-gathering costs. We use the 2020 coronavirus outbreak as a natural experiment to determine whether CEO duality is beneficial during crisis periods. We find that in 2020, S&P 1500 firms with CEO duality exhibit smaller increases in default probability risk than firms with non-duality in the presence of high information costs. Firms with CEO duality experience a smaller decrease in profitability when information costs are high. We also find that firms with CEO duality offer cumulative abnormal returns significantly higher than those of other firms. CEO duality is more valuable in firms with higher information costs. Our results indicate that CEO duality is valuable during crisis periods, particularly when information costs are high. These results are consistent with stewardship theory and indicate that the concentration of power from CEO duality is beneficial during crisis periods.

Suggested Citation

  • Hassan, M. Kabir & Houston, Reza & Karim, M.Sydul & Sabit, Ahmed, 2023. "CEO duality and firm performance during the 2020 coronavirus outbreak," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    • Handle: RePEc:eee:joecas:v:27:y:2023:i:c:s170349492200038x
    DOI: 10.1016/j.jeca.2022.e00278
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    2. Neha Hussain & Burhan Rasheed & Zohair Farooq Malik & Syed Taha Fraz & Muhammad Umar Munir, 2024. "Ethics Redefined: A Comparative Study on Women on Boards vs. Attributes of Corporate Governance in the Light of Firm Performance," Journal of Economic Impact, Science Impact Publishers, vol. 6(2), pages 131-137.
    3. Md Reiazul Haque & Md Lutfur Rahman & Mohammed Abdullah Al Mamun, 2024. "Is One Head Better Than Two? Dual Leadership and Firm Performance During the COVID‐19 Crisis," Abacus, Accounting Foundation, University of Sydney, vol. 60(2), pages 236-271, June.
    4. Qiuyan Yan & Jing Yan & Duo Zhang & Shuochen Bi & Ying Tian & Riaqa Mubeen & Jaffar Abbas, 2024. "Does CEO Power Affect Manufacturing Firms’ Green Innovation and Organizational Performance? A Mediational Approach," Sustainability, MDPI, vol. 16(14), pages 1-17, July.

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