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CEO Duality: Newspapers and Stock Market Reactions

Author

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  • Marco Caiffa

    (Deloitte Financial Advisory, 00172 Roma, Italy)

  • Vincenzo Farina

    (Department of Management and Law, University of Rome ‘Tor Vergata’, 00133 Roma, Italy)

  • Lucrezia Fattobene

    (Department of Management and Law, University of Rome ‘Tor Vergata’, 00133 Roma, Italy)

Abstract

This study aims to investigate the unsettled issue of the relationship between CEO duality and a firm’s value through the perspective of investors’ reaction to news which mention apical directors with a single role and Board Chair CEOs. With a unique and hand-collected database of 60,805 newspaper articles, text-analysis, event-study and regression analysis methodologies were applied to capture news sentiment and study the direction and the magnitude of the stock market reaction. Results reveal that news mentioning Board Chair CEOs are negatively processed by investors, revealing a negative perception by investors about CEO duality. The study provides empirical support for the agency theory, in contrast to the stewardship theory, in the interpretation of CEO duality. It also proposes the methodology of systematically quantifying language to explore corporate governance issues and their link with financial markets.

Suggested Citation

  • Marco Caiffa & Vincenzo Farina & Lucrezia Fattobene, 2021. "CEO Duality: Newspapers and Stock Market Reactions," JRFM, MDPI, vol. 14(1), pages 1-18, January.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:1:p:35-:d:479427
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