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CEO duality and firm performance: the moderating roles of CEO informal power and board involvements

Author

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  • Chaminda Wijethilake
  • Athula Ekanayake

Abstract

Purpose - This study aims to draw on the resource dependence theory to synthesize the conflicting arguments as well as commonalities of the agency and stewardship perspectives on the relationship between CEO duality and firm performance. Design/methodology/approach - Multiple regression analysis is used to analyze the data collected from a sample of 212 large-scale publicly listed companies representing 20 sectors in the Colombo Stock Exchange in Sri Lanka. Findings - The research results based on all of 212 publicly listed companies in Sri Lanka show, in support of the agency theory, that CEO duality exerts a negative effect on firm performance when the CEO is equipped with additional informal power. Conversely, CEO duality exhibits a positive effect on firm performance when board involvements are high, a finding that supports the commonalities of the agency and stewardship theoretical perspectives. Practical implications - By examining the governance practices and concepts in an Asian developing economy, this study provides insight into the power dynamics between the CEO and the board of directors in managerial contexts that are largely different from those in western countries. Originality/value - This study expands the theoretical underpinning of corporate governance research by identifying the performance implications of CEO duality within the broad context of the resource provision of the board of directors and the informal power of CEOs.

Suggested Citation

  • Chaminda Wijethilake & Athula Ekanayake, 2020. "CEO duality and firm performance: the moderating roles of CEO informal power and board involvements," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 16(8), pages 1453-1474, January.
    • Handle: RePEc:eme:srjpps:srj-12-2018-0321
    DOI: 10.1108/SRJ-12-2018-0321
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    Citations

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    Cited by:

    1. Misbah Azam & Dr. Ali Raza Elahi & Dr. Shahbaz-Ul-Haque, 2023. "Managerial Discretion and Corporate Governance Mechanism: A Case Study of Public Limited Firms of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(4), pages 564-576.
    2. 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).
    3. Changrong Wang & Lufeng Gou & Xuemei Li, 2022. "Is Education Beneficial to Environmentally Friendly Behaviors? Evidence from CEOs," IJERPH, MDPI, vol. 19(18), pages 1-21, September.
    4. Mohit Pathak & Arti Chandani, 2023. "Board composition, executive compensation, and financial performance: panel evidence from India," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(4), pages 359-373, December.

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