CEO Duality and Firm Performance: Does Economic Policy Uncertainty Mediate the Relation?

Abstract

Exploiting two exogenous shocks, we examine the relation between CEO-Chairman duality and firm performance. We report evidence that CEO duality benefits a firm when economic policy uncertainty is high. This implies that CEO-Chairman duality is an advantageous governance mechanism for coping with economic policy uncertainty. We show that the Sarbanes-Oxley Act reduced firm performance if a firm had separate leadership in 2001. However, this negative effect was mitigated if a firm had combined leadership in 2001. The results suggest that CEO duality is complementary to board independence and that the value of CEO duality is contingent on a firm’s environment.

Keywords: CEO-Chairman Duality, Economic Policy Uncertainty, Sarbanes-Oxley Act, Board Independence, Firm Performance

JEL Classification: G34, D80, G18