CEO and Board Chair Roles: To Split or Not to Split

53 Pages Posted: 1 Jun 2009 Last revised: 29 Jan 2010

See all articles by Aiyesha Dey

Aiyesha Dey

Harvard Business School

Ellen Engel

University of Illinois at Chicago - College of Business Administration

Xiaohui Liu

University of Texas at Dallas - Department of Accounting & Information Management

Date Written: December 16, 2009

Abstract

We document that firms that are larger, have stronger governance and more able CEOs are more likely to combine CEO and board chair roles (i.e., duality). We also document that firms that split these roles have significantly lower announcement and post-announcement returns, and lower contributions of investments to shareholder wealth. This result is more pronounced for firms that split due to investor pressure, and performance outcomes are more negative for firms with higher predicted values of duality based on our economic determinants model. Our evidence suggests that recent proposals for splitting the roles for all firms warrant more careful consideration.

Keywords: CEO duality; corporate governance; board chair; firm performance, investments

JEL Classification: G30, G38

Suggested Citation

Dey, Aiyesha and Engel, Ellen and Liu, Xiaohui, CEO and Board Chair Roles: To Split or Not to Split (December 16, 2009). Chicago Booth Research Paper No. 09-23. Available at SSRN: https://ssrn.com/abstract=1412827

Aiyesha Dey (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ellen Engel

University of Illinois at Chicago - College of Business Administration ( email )

601 South Morgan Street
11th Floor
Chicago, IL 60607
United States
312-413-3418 (Phone)

Xiaohui Liu

University of Texas at Dallas - Department of Accounting & Information Management ( email )

2601 North Floyd Road
Richardson, TX 75083-0688
United States

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