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Firms' rationales for CEO duality: Evidence from a mandatory disclosure regulation

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  • Goergen, Marc
  • Limbach, Peter
  • Scholz-Daneshgari, Meik

Abstract

Exploiting the 2009 amendments to Regulation SK, 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.

Suggested Citation

  • Goergen, Marc & Limbach, Peter & Scholz-Daneshgari, Meik, 2020. "Firms' rationales for CEO duality: Evidence from a mandatory disclosure regulation," Journal of Corporate Finance, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:corfin:v:65:y:2020:i:c:s0929119920302145
    DOI: 10.1016/j.jcorpfin.2020.101770
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    1. Hendriock, Mario, 2020. "Implied cost of capital and mutual fund performance," CFR Working Papers 20-11, University of Cologne, Centre for Financial Research (CFR).
    2. Hassan, M. Kabir & Houston, Reza & Karim, M.Sydul & Sabit, Ahmed, 2023. "CEO duality and firm performance during the 2020 coronavirus outbreak," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    3. Jagannathan, Murali & Jiao, Wei & Wermers, Russ, 2020. "International characteristic-based asset pricing," CFR Working Papers 20-13, University of Cologne, Centre for Financial Research (CFR).
    4. Theissen, Erik & Zimmermann, Lukas, 2020. "Do contented customers make shareholders wealthy? Implications of intangibles for security pricing," CFR Working Papers 20-12, University of Cologne, Centre for Financial Research (CFR).
    5. Andrew Y. Chen & Tom Zimmermann, 2022. "Open Source Cross-Sectional Asset Pricing," Critical Finance Review, now publishers, vol. 11(2), pages 207-264, May.
    6. Andres, Christian & Bazhutov, Dmitry & Cumming, Douglas J. & Limbach, Peter, 2021. "Does Speculative News Hurt Productivity? Evidence from Takeover Rumors," CFR Working Papers 21-02, University of Cologne, Centre for Financial Research (CFR), revised 2021.
    7. Vicky Ching Gu, 2023. "How independent should a board be? Examine the corporate social responsibility performance in the US healthcare sector," Service Business, Springer;Pan-Pacific Business Association, vol. 17(3), pages 695-721, September.
    8. Dang, Man & Puwanenthiren, Premkanth & Nguyen, Manh Toan & Hoang, Viet Anh & Mazur, Mieszko & Henry, Darren, 2022. "Does managerial tone matter for stock liquidity? Evidence from textual disclosures," Finance Research Letters, Elsevier, vol. 48(C).

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    More about this item

    Keywords

    Board leadership; CEO duality; Corporate governance; Regulation S-K; Stock returns; Textual analysis;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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