Firms’ Rationales for CEO Duality: Evidence from a Mandatory Disclosure Regulation

Exploiting the 2009 amendments to Regulation Ssingle bondK, we provide unique evidence on the first-time disclosure of the reasons firms state for combining or separating the roles of CEO and chairman. The stated reasons support both agency theory and organization theory. They are more numerous, comprise more words, and have a more positive tone for firms with duality. Examining the announcement returns to firms' disclosures, we find that investors evaluate the most frequently cited reasons for CEO duality by considering firm's characteristics. Our evidence enhances the understanding of firms' endogenous decision to opt for CEO duality and its value consequences.

Keywords: Board leadership, CEO duality, Corporate governance, Regulation S-K, Stock returns, Textual analysis

JEL Classification: G14, G34, G38

Suggested Citation: Suggested Citation

Goergen, Marc and Limbach, Peter and Scholz-Daneshgari, Meik, Firms’ Rationales for CEO Duality: Evidence from a Mandatory Disclosure Regulation (February 8, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 598/2019, Journal of Corporate Finance, Vol. 65, 2020, Available at SSRN: https://ssrn.com/abstract=3331086 or http://dx.doi.org/10.2139/ssrn.3331086