Should Chairman and CEO Be Separated? Leadership Structure and Firm Performance in Switzerland

24 Pages Posted: 7 Apr 2005 Last revised: 15 Jun 2013

See all articles by Markus Schmid

Markus Schmid

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance

Date Written: April 1, 2008

Abstract

We investigate the valuation effects of leadership structure in Switzerland where, in contrast to the U.S., a separation of the CEO and chairman functions is common. Consistent with the majority of prior research focusing on the U.S., we find no evidence of a systematic and significant difference in valuation between firms with combined and firms with separated functions. We also investigate whether leadership structure is related to firm-level corporate governance characteristics and find a similar curvilinear relationship between leadership structure and managerial shareholdings as is observed between firm value and managerial shareholdings. A possible interpretation is that agency costs associated with a combined function are mitigated by a higher incentive alignment of the CEO/chairman through an adequate level of managerial shareholdings.

Keywords: Leadership structure, Firm valuation, Corporate governance, Managerial Shareholdings

JEL Classification: G32, G34, G38

Suggested Citation

Schmid, Markus and Zimmermann, Heinz, Should Chairman and CEO Be Separated? Leadership Structure and Firm Performance in Switzerland (April 1, 2008). Available at SSRN: https://ssrn.com/abstract=696381 or http://dx.doi.org/10.2139/ssrn.696381

Markus Schmid (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance ( email )

Peter Merian Weg 6
Basel, 4002
Switzerland
+41 61 267 33 16 (Phone)
+41 61 267 08 98 (Fax)

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