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Does CEO duality affect corporate performance? Evidence from the US banking crisis

Does CEO duality affect corporate performance? Evidence from the US banking crisis Purpose – The global financial crisis of 2008 raises many governance questions regarding the roles and responsibilities of executives and board members. Simultaneously, CEO duality in the USA and elsewhere has come under renewed scrutiny because of the perceived loss of checks and balances and resultant abuse of power. The authors suggest that the financial crisis presents a unique opportunity to explore the effects of, and attitudes, to CEO duality. The purpose of this paper therefore is to investigate whether CEO duality is associated with bank failure and whether bank regulators, as can be expected, are opposed to CEO duality. Design/methodology/approach – The authors investigated the correlation between CEO duality and publicly traded banks in the USA that received Federal bailout funds, using available databases, and investigated bank regulators' attitudes to CEO duality using a series of structured interviews. Findings – No correlation was found between bank failure and CEO duality. However, a strong correlation was found between bank ownership and receipt of Federal bailout funds in that publically owned banks were far more likely to have received bailout funds than banks which were privately owned. Surprisingly, it was also found that Regulators accepted CEO duality for several reasons and have no agenda to limit it. Practical implications – The results suggest that CEO duality is a less significant issue factor in corporate management than suggested by many previous researchers and policy makers. This has clear implications for governance, regulation and legislation. Originality/value – This study is the first to investigate the relationship between bank performance and CEO duality. The authors' results suggest that whilst there may be many good reasons for limiting CEO duality, the key measure of adverse effects on corporate performance in this sector is not one of them. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Regulation and Compliance Emerald Publishing

Does CEO duality affect corporate performance? Evidence from the US banking crisis

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Publisher
Emerald Publishing
Copyright
Copyright © 2012 Emerald Group Publishing Limited. All rights reserved.
ISSN
1358-1988
DOI
10.1108/13581981211199407
Publisher site
See Article on Publisher Site

Abstract

Purpose – The global financial crisis of 2008 raises many governance questions regarding the roles and responsibilities of executives and board members. Simultaneously, CEO duality in the USA and elsewhere has come under renewed scrutiny because of the perceived loss of checks and balances and resultant abuse of power. The authors suggest that the financial crisis presents a unique opportunity to explore the effects of, and attitudes, to CEO duality. The purpose of this paper therefore is to investigate whether CEO duality is associated with bank failure and whether bank regulators, as can be expected, are opposed to CEO duality. Design/methodology/approach – The authors investigated the correlation between CEO duality and publicly traded banks in the USA that received Federal bailout funds, using available databases, and investigated bank regulators' attitudes to CEO duality using a series of structured interviews. Findings – No correlation was found between bank failure and CEO duality. However, a strong correlation was found between bank ownership and receipt of Federal bailout funds in that publically owned banks were far more likely to have received bailout funds than banks which were privately owned. Surprisingly, it was also found that Regulators accepted CEO duality for several reasons and have no agenda to limit it. Practical implications – The results suggest that CEO duality is a less significant issue factor in corporate management than suggested by many previous researchers and policy makers. This has clear implications for governance, regulation and legislation. Originality/value – This study is the first to investigate the relationship between bank performance and CEO duality. The authors' results suggest that whilst there may be many good reasons for limiting CEO duality, the key measure of adverse effects on corporate performance in this sector is not one of them.

Journal

Journal of Financial Regulation and ComplianceEmerald Publishing

Published: Feb 17, 2012

Keywords: United States of America; Banks; Chief executive officers; CEO duality; Corporate governance; Financial regulation

References

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