The dynamic relationship between CEO duality and firm performance: The moderating role of board independence

For a panel of U.S. firms, we employ system GMM to estimate a dynamic model of the relationship between firm performance and governance characteristics including board leadership structure. Our results provide convincing evidence that a joint leadership structure, i.e., CEO duality has statistically significant negative impacts on firm performance. We also document that this effect is positively moderated by board independence. The results are robust across a number of sensitivity tests. The findings are consistent with arguments advanced by both agency theorists and some management scholars that though duality might reduce firm performance through managerial entrenchment, it can provide benefits to the firm in the presence of board vigilance.