Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-17T14:55:18.822Z Has data issue: false hasContentIssue false
  • English
  • Français

CEO Duality and Firm Performance during China's Institutional Transitions

Published online by Cambridge University Press:  02 February 2015

Mike W. Peng ,
Shujun Zhang  and
Xinchun Li
Mike W. Peng
Affiliation:
University of Texas at Dallas, USA
Shujun Zhang
Affiliation:
Sun Yat-sen University, China
Xinchun Li
Affiliation:
Sun Yat-sen University, China
Get access Rights & Permissions [Opens in a new window]

Abstract

Does CEO duality – the practice of one person serving both as a firm's CEO and board chair – contribute to or inhibit firm performance? Agency theory suggests that CEO duality is bad for performance because it compromises the monitoring and control of the CEO. Stewardship theory, in contrast, argues that CEO duality may be good for performance due to the unity of command it presents. The empirical evidence, largely from developed economies, is largely inconclusive. This article joins the debate by extending empirical work to the largely unexplored context of institutional transitions. Our findings, based on an archival database covering 403 publicly listed firms and 1,202 company-years in China, offer stronger support for stewardship theory and relatively little support for agency theory. Finally, we also call for a contingency perspective to specify the nature of conditions such as resource scarcity and environmental dynamism under which CEO duality may be especially valuable.

Keywords

CEO dualityChinafirm performanceinstitutional transitions两职合一企业绩效制度转型中国
Type
Articles
Information
Management and Organization Review , Volume 3 , Issue 2 , July 2007 , pp. 205 - 225
Copyright
Copyright © International Association for Chinese Management Research 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Au, K., Peng, M. W., & Wang, D. 2000. Interlocking directorates, firm strategies, and performance in Hong Kong: Towards a research agenda. Asia Pacific Journal of Management, 17(1): 29–47.CrossRefGoogle Scholar
Bai, C., Liu, Q., Lu, J., Song, F., & Zhang, J. 2004. Corporate governance and market valuation in China. Journal of Comparative Economics, 32: 599–616.CrossRefGoogle Scholar
Baliga, B., Moyer, N., & Rao, R. 1996. CEO duality and firm performance: What's the fuss. Strategic Management Journal, 17: 41–53.Google Scholar
Bourgeois, L. 1981. On the measurement of organizational slack. Academy of Management Review, 6: 29–39.CrossRefGoogle Scholar
Boyd, B. 1995. CEO duality and firm performance: A contingency model. Strategic Management Journal, 16: 301–312.CrossRefGoogle Scholar
Brickley, J., Coles, J., & Jarrell, G. 1997. Leadership structure: Separating the CEO and chairman of the board. Journal of Corporate Finance, 4: 189–220.Google Scholar
Cha, L. 2001. The future of China ‘s capital markets and the role of corporate governance. Speech delivered at the China Business Summit, Shanghai, April 18. [Cited July 14, 2001.] Available from URL: http://www.csrc.gov.cn.Google Scholar
Clarke, D. C. 2005. The independent director in Chinese corporate governance. Working paper. University of Washington School of Law, Seattle, Wash.Google Scholar
CSRC (China Securities Regulatory Commission). 2002. Code of corporate governance for listed companies in China. Beijing: CSRC. [Cited June 26, 2002.] Available from URL: http://www.csrc.gov.cn.Google Scholar
CSRC (China Securities Regulatory Commission). 2004. China's securities and futures markets. Beijing: CSRC. [Cited April 12, 2005.] Available from URL: http://www.csrc.gov.cn.Google Scholar
Cull, R., & Xu, L. C. 2005. Institutions, ownership, and finance: The determinants of profit reinvestment among Chinese firms. Journal of Financial Economics, 77: 117–146.Google Scholar
Cyert, R., & March, J. 1963. A behavioral theory of the firm. Upper Saddle River, N.J.: Prentice-Hall.Google Scholar
Dalton, D., Daily, C., Ellstrand, A., & Johnson, J. 1998. Meta-analytic reviews of board composition, leadership structure, and financial performance. Strategic Management Journal, 19: 269–290.Google Scholar
Dess, G., & Beard, D. 1984. Dimensions of organizational task environments. Administrative Science Quarterly, 29: 52–73.Google Scholar
Donaldson, L., & Davis, J. 1991. Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16: 49–64.CrossRefGoogle Scholar
Fama, E., & Jensen, M. 1983. Separation of ownership and control. Journal of Lavu and Economics, 28: 301–325.CrossRefGoogle Scholar
Finkelstein, S., & D'Aveni, R. 1994. CEO duality as a double-edged sword: How boards of directors balance entrenchment avoidance and unity of command. Academy of Management Journal, 37: 1079–1108.CrossRefGoogle Scholar
Harrigan, K. R. 1983. Research methodologies for contingency approaches to business strategy. Academy of Management Review, 8: 398–405.Google Scholar
Judge, W. Q., Naoumova, L., & Koutzevol, N. 2003. Corporate governance and firm performance in Russia: An empirical study. Journal of World Business, 38: 385–396.Google Scholar
Kuhn, T. S. 1970. The structure of scientific revolutions. Chicago, Ill.: University of Chicago Press.Google Scholar
Lawrence, P., & Lorsch, J. 1967. Organization and environment. Boston, Mass.: Harvard Business School Press.Google Scholar
Li, M., & Simerly, R. L. 1998. The moderating effect of environmental dynamism on the ownership and performance relationship. Strategic Management Journal, 19: 169–179.3.0.CO;2-2>CrossRefGoogle Scholar
Li, Y., Sun, Y., & Liu, Y. 2006. An empirical study of SOEs' market orientation in transitional China. Asia Pacific Journal of Management, 23: 93–113.Google Scholar
Luo, Y., & O'Connor, N. 1998. Structural changes to foreign direct investment in China: An evolutionary perspective. Journal of Applied Management Studies, 7: 95–109.Google Scholar
Luo, Y., & Peng, M. W. 1999. Learning to compete in a transition economy: Experience, environment, and performance. Journal of International Business Studies, 30(2): 269–296.Google Scholar
March, J. 2005. Parochialism in the evolution of a research community: The case of organization studies. Management and Organization Review, 1(1): 5–22.CrossRefGoogle Scholar
Meyer, K. E. 2006. Asian management research needs more self-confidence. Asia PacificJournal of Management, 23: 119–137.CrossRefGoogle Scholar
Ministry of Commerce (MOFCOM). 2006. 2005 report on foreign direct investment in China. Beijing: MOFCOM. [Cited September 11, 2006.] Available from URL: http://wzs.mofcom.gov.cn/.Google Scholar
Peng, M. W. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28(2): 275–296.Google Scholar
Peng, M. W. 2004. Outside directors and firm performance during institutional transitions. Strategic Management Journal, 25(4): 453–471.CrossRefGoogle Scholar
Peng, M. W. 2005. From China strategy to global strategy. Asia Pacific Journal of Management, 22(2): 123–141.CrossRefGoogle Scholar
Peng, M. W., Au, K., & Wang, D. 2001. Interlocking directorates as corporate governance in Third World multinationals: Theory and evidence from Thailand. Asia Pacific Journal of Management, 18(2): 161–181.CrossRefGoogle Scholar
Peng, M. W., Buck, T., & Filatotchev, I. 2003. Do outside directors and new managers help improve firm performance? An exploratory study in Russian privatization. Journal of World Business, 38(4): 348–360.CrossRefGoogle Scholar
Peng, M. W., & Heath, P. 1996. The growth of the firm in planned economies in transitions: Institutions, organizations, and strategic choices. Academy of Management Review, 21(2): 492–528.CrossRefGoogle Scholar
Peng, M. W., & Luo, Y. 2000. Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43(3): 486–501.Google Scholar
Peng, M. W., Wang, D., & Jiang, Y. 2007. An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies (in press).Google Scholar
Peng, M. W., Zhou, Y., & York, A. 2006. Behind make or buy decisions in export strategy: A replication and extension of Trabold. Journal of World Business, 41(3): 289–300.Google Scholar
Pfeffer, J., & Salancik, G. 1978. The external control of organizations. New York, N.Y.: Harper & Row.Google Scholar
Pi, L., & Timme, A. 1993. Corporate control and bank efficiency. Journal of Banking and Finance, 17: 515–530.CrossRefGoogle Scholar
Rechner, P., & Dalton, D. 1991. CEO duality and organizational performance: A longitudinal analysis. Strategic Management Journal, 12: 155–160.CrossRefGoogle Scholar
Roth, K., & Kostova, T. 2003. Organizational coping with institutional upheaval in transition economies. Journal of World Business, 38: 314–330.CrossRefGoogle Scholar
Singh, K., Ang, S. H., & Leong, S. M. 2003. Increasing replication for knowledge accumulation in strategy research. Journal of Management, 29: 533–549.Google Scholar
Song, F., Yuan, P., & Gao, F. 2006. Does large state shareholder affect the governance of Chinese board of directors? Working paper, Tsinghua University (In Chinese.)Google Scholar
Tan, R. S. K., Chang, P. L., & Tan, T. W. 2001. CEO share ownership and firm value. Asia Pacific Journal of Management, 18: 355–371.Google Scholar
Tan, J., & Peng, M. W. 2003. Organizational slack and firm performance during economic transitions: Two studies from an emerging economy. Strategic Management Journal, 24: 1249–1263.CrossRefGoogle Scholar
Tian, J. J., & Lau, C.-M. 2001. Board composition, leadership structure, and performance in Chinese shareholding companies. Asia Pacific Journal of Management, 18: 245–263.CrossRefGoogle Scholar
Thompson, J. D. 1967. Organizations in action. New York N.Y.: McGraw-Hill.Google Scholar
Tsang, E., & Kwan, K. 1999. Replication and theory development in organizational science. Academy of Management Review, 24: 759–780.Google Scholar
Tsui, A. 2006. Contextualization in Chinese management research. Management and Organization Review, 2: 1–13.Google Scholar
Worrell, D., Nemec, C., & Davidson, W. 1997. One hat too many: Key executive plurality and shareholder wealth. Strategic Management Journal, 18: 499–507.3.0.CO;2-F>CrossRefGoogle Scholar
Westphal, J. D., & Zajac, E.J. 1995. Who shall govern? CEO/board power, demographic similarity, and new director selection. Administrative Science Quarterly, 40: 60–83.Google Scholar
Wright, M., Filatotchev, I., Hoskisson, R. E., & Peng, M. W. 2005. Strategy research in emerging economies: Challenging the conventional wisdom. Journal of Management Studies, 42(1): 1–33.Google Scholar
Wu, S., Liu, Z., & Fan, J. 2001. An empirical study of the relationship between nonexecutive directors and firm performance. Zhongguo Gongye Jingji (China Industrial Economy), 9: 69–76. (In Chinese.)Google Scholar
Xu, X., & Wang, Y. 1999. Ownership structure and corporate governance in Chinese stock companies. China Economic Review, 10: 75–98.Google Scholar
Yeung, H. W. C. 2006. Change and continuity in Southeast Asian ethnic Chinese business. Asia Pacific Journal of Management, 23: 229–254.Google Scholar
Young, M., Peng, M. W., Ahlstrom, D., Bruton, G., & Jiang, Y. 2007. Corporate governance in emerging economies: A review of the principal-principal perspective. Journal of Management Studies (in press).Google Scholar
Yu, D.-Z., & Gu, L.-Pv. 2002. Leadership structure of corporation and performance. Zhongguo Gongye Jingji (China Industrial Economy), February, 70–78. (In Chinese.)Google Scholar
Zhou, C., Delios, A., & Yang, J. Y. 2002. Locational determinants of Japanese foreign direct investment in China. Asia Pacific Journal of Management, 19: 63–86.CrossRefGoogle Scholar