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

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

Aiyesha Dey

University of Minnesota - Twin Cities - Carlson School of Management

Ellen Engel

University of Chicago Booth School of Business

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)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
6126268626 (Phone)

Ellen Engel

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-0966 (Phone)
866-377-52152 (Fax)

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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