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

AuthorJunyoup Lee,Kiyoung Chang,Hyeongsop Shim
Published date01 December 2019
Date01 December 2019
CEO Duality and Firm Performance:
Does Economic Policy Uncertainty
Mediate the Relation?*
College of Business, University of South Florida Sarasota-Manatee, Sarasota, FL
School of Business Administration, Ulsan National Institute of Science and
Technology, Ulsan, South Korea and
College of Business & Economics, Gachon Univeristy, Seongnam, South Korea
Exploiting two exogenous shocks, we examine the relation between CEO
Chairman duality and firm performance. We report evidence that CEO dual-
ity 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. How-
ever, this negative effect was mitigated if a firm had combined leadership in
2001. The results suggest that CEO duality is complementary to board inde-
pendence and that the value of CEO duality is contingent on a firms
JEL Codes: G34; D80; G18
Accepted: 22 March 2018
Recent political upheaval arising from the unexpected outcomes of presidential
elections in several countries has created substantial political uncertainty, in
turn increasing business uncertainty for corporations. This raises the general
question of how political or policy uncertainty, which can act as an exogenous
shock to corporations, affects the relation between corporate governance and
* Hyeongsop Shim appreciates the financial support from the U-K brand research fund
(1.170069.01) of Ulsan National Institute of Science and Technology and the Ministry of Education
of the Republic of Korea and the National Research Foundation of Korea (NRF-R1624791). Junyoup
Lee also appreciates the support by Human Resources Program in Energy Technologyof Korea
Institute of Energy Technology Evaluation and Planning (KETEP), granted financial resource from
the Ministry of Trade, Industry & Energey, Republic of Korea (No. 20164010201030). The authors
are grateful for the insightful comments and suggestions by the editor and a referee, which
improved the paper a lot. All error are our own.
© 2018 International Review of Finance Ltd. 2018
International Review of Finance, 19:4, 2019: pp. 877891
DOI: 10.1111/irfi.12193

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