Chair–CEO trust and firm performance

Abstract

This study investigates whether trust between a corporation’s board chair and the CEO affects firm performance. After using a unique survey data set of regional trustworthiness from China to measure this trust, we find a positive relationship between trust and the performance of Chinese companies from 2000 to 2016. Additional test results suggest that the relationship is causal. Further results show that the positive trust-performance effect is more evident for firms with greater advisory needs and boards that can deliver high-quality advice. Finally, we find supporting evidence to our conjecture that the Chair–CEO trust increases firm value by improving the board advisory results, including value-adding decisions of R&D and merger and acquisition. JEL Classification: G32, G34, G41

Revealing the Capital Structure Factor Is Dominated by Debt to Lq45 Companies on the Indonesia Stock Exchange

“…The results of this study are in line with the opinion of Hamidlal and Harymawan (2021), explaining that the longer the CEO is, the better the capital structure will be. This research is also in line with (Zheng and Zhu, 2021) finding evidence that CEO trust increases firm value through capital structure management. Research by Al-Duais et al ( 2021) also explains that the longer the CEO serves or the more experience he has, the greater his power to make decisions in managing capital structure.…”

“…In addition, according to research (Hamidlal and Harymawan, 2021), the longer the CEO serves, the better the capital structure management. Research (Zheng and Zhu, 2021) or the more experience he has, the greater his power to make decisions in managing capital structure.…”

Social connections, CEO turnover and corporate policy change

“…We estimate a regression analysis using a DiD framework, model (2), to test the firm performance consequences following studies by Schultz et al (2010) and Zheng and Zhu (2022). Firm performance has been operationalised using Tobin’s Q , cash flow from operating activities scaled by sales ( CFO ) and buy and hold abnormal returns ( BHAR ).…”

“…To further assure the main finding, we re-estimate the baseline regression model after including a set of additional control variables following the studies by Ali and Zhang (2015) and Zheng and Zhu (2022). First, we include board-level/governance variables (i.e.…”

“…Under this view, the connected incoming CEOs would engage in policy changes only to the extent they believe is required, compared to non-connected incoming CEOs who would make substantial changes to remove the predecessor's footprints, that is, a positive effect. We estimate a regression analysis using a DiD framework, model (2), to test the firm performance consequences following studies by Schultz et al (2010) and Zheng and Zhu (2022). Firm performance has been operationalised using Tobin's Q, cash flow from operating activities scaled by sales (CFO) and buy and hold abnormal returns (BHAR).…”