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CEO duality leadership and corporate diversification behavior

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  • Kim, Kong-Hee
  • Al-Shammari, Hussam A.
  • Kim, Bongjin
  • Lee, Seung-Hyun
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    Abstract

    This study examines an important, yet understudied relationship between CEO duality and corporate diversification. Results based on the data collected from Fortune 1000 U.S companies indicate that CEO duality is positively associated with corporate diversification into unrelated industries. Further analyses reveal that this relationship is moderated by a number of corporate governance mechanisms. We find that board equity ownership and institutional ownership concentration weaken the initially positive relationship between CEO duality and unrelated diversification while CEO tenure and board independence strengthen this relationship.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Research.

    Volume (Year): 62 (2009)
    Issue (Month): 11 (November)
    Pages: 1173-1180

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    Handle: RePEc:eee:jbrese:v:62:y:2009:i:11:p:1173-1180

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    Web page: http://www.elsevier.com/locate/jbusres

    Related research

    Keywords: CEO duality Unrelated diversification Corporate governance mechanisms;

    References

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    1. William P. Wan, 2005. "Country Resource Environments, Firm Capabilities, and Corporate Diversification Strategies," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 161-182, 01.
    2. Wallace Davidson & Carol Nemec & Dan Worrell, 2006. "Determinants of CEO Age at Succession," Journal of Management and Governance, Springer, vol. 10(1), pages 35-57, 03.
    3. Karl Lins & Henri Servaes, 1999. "International Evidence on the Value of Corporate Diversification," Journal of Finance, American Finance Association, vol. 54(6), pages 2215-2239, December.
    4. Jay C. Hartzell & Laura T. Starks, 2003. "Institutional Investors and Executive Compensation," Journal of Finance, American Finance Association, vol. 58(6), pages 2351-2374, December.
    5. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
    6. Clarke, Jonathan E. & Fee, C. Edward & Thomas, Shawn, 2004. "Corporate diversification and asymmetric information: evidence from stock market trading characteristics," Journal of Corporate Finance, Elsevier, vol. 10(1), pages 105-129, January.
    7. Denis, David J & Denis, Diane K & Sarin, Atulya, 1997. " Agency Problems, Equity Ownership, and Corporate Diversification," Journal of Finance, American Finance Association, vol. 52(1), pages 135-60, March.
    8. Jacquemin, Alexis P & Berry, Charles H, 1979. "Entropy Measure of Diversification and Corporate Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 359-69, June.
    9. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    10. L. A. A. Van den Berghe & Tom Baelden, 2005. "The Monitoring Role of the Board: one approach does not fit all," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(5), pages 680-690, 09.
    11. Nelson, James, 2005. "Corporate governance practices, CEO characteristics and firm performance," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 197-228, March.
    12. Walters, Bruce A. & Kroll, Mark J. & Wright, Peter, 2007. "CEO tenure, boards of directors, and acquisition performance," Journal of Business Research, Elsevier, vol. 60(4), pages 331-338, April.
    13. Martin, John D. & Sayrak, Akin, 2003. "Corporate diversification and shareholder value: a survey of recent literature," Journal of Corporate Finance, Elsevier, vol. 9(1), pages 37-57, January.
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    Cited by:
    1. Bliss, Mark A. & Gul, Ferdinand A., 2012. "Political connection and cost of debt: Some Malaysian evidence," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1520-1527.
    2. Emilia Peni, 2014. "CEO and Chairperson characteristics and firm performance," Journal of Management and Governance, Springer, vol. 18(1), pages 185-205, February.
    3. Ozer, Mine, 2010. "Top management teams and corporate political activity: Do top management teams have influence on corporate political activity?," Journal of Business Research, Elsevier, vol. 63(11), pages 1196-1201, November.
    4. Waldron, Theodore L. & Graffin, Scott D. & Porac, Joseph F. & Wade, James B., 2013. "Third-party endorsements of CEO quality, managerial discretion, and stakeholder reactions," Journal of Business Research, Elsevier, vol. 66(12), pages 2592-2599.
    5. George, Rejie & Kabir, Rezaul, 2012. "Heterogeneity in business groups and the corporate diversification–firm performance relationship," Journal of Business Research, Elsevier, vol. 65(3), pages 412-420.
    6. Collins, Denton & Huang, Henry, 2011. "Management entrenchment and the cost of equity capital," Journal of Business Research, Elsevier, vol. 64(4), pages 356-362, April.

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