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An agency-based perspective on the performance consequences of COO adoption

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  • Nikos Vafeas
  • Adamos Vlittis

Abstract

The aim of this study is to explain the performance consequences of the adoption of a Chief Operating Officer (COO) position by drawing from agency theory. Although, prior research has documented a performance penalty associated with the use of this position, we currently have an incomplete understanding of the factors explaining this penalty. This study suggests that the delegation of CEO decision rights to the COO is explained by information transfer and agency considerations. Largely consistent with agency theory, our empirical analysis suggests information transfer considerations are related to the likelihood of COO adoption, while CEO ownership and board characteristics mitigate the related performance penalty. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Nikos Vafeas & Adamos Vlittis, 2012. "An agency-based perspective on the performance consequences of COO adoption," Review of Quantitative Finance and Accounting, Springer, vol. 39(3), pages 361-382, October.
    • Handle: RePEc:kap:rqfnac:v:39:y:2012:i:3:p:361-382
    DOI: 10.1007/s11156-011-0255-y
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    More about this item

    Keywords

    Decision rights delegation; Information transfer; Agency costs; Chief operating officer; G34;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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