Should Chairman and CEO be Separated? Leadership Structure and Firm Performance in Switzerland
We investigate the valuation effects of leadership structure in Switzerland where, in contrast to the u.s., a separation of the ceO and chairman functions is common. Consistent with the majority of prior research focusing on the u.s., we find no evidence of a systematic and significant difference in valuation between firms with combined and firms with separated functions. We also investigate whether the leadership structure is related to firm-level corporate governance characteristics. We find a curvilinear relation between leadership structure and managerial shareholdings that is similar to what we observe between firm value and managerial shareholdings. A possible interpretation is that the agency costs associated with a combined function are mitigated by a higher incentive alignment of the ceO/chairman through an adequate level of managerial shareholdings.
Volume (Year): 60 (2008)
Issue (Month): 2 (April)
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