Political Influence and Cost vs. Benefit of CEO Duality: Evidence from Post-IPO Performance in China

Abstract

Abstract:Investigating the post-IPO performance of Chinese firms, we empirically examine the moderating effect of political influence in the cost vs. benefit analysis of CEO duality (the arrangement for the CEO to chair the board). We find that, on average, post-IPO performance is positively associated with CEO duality. Meanwhile, such a positive association is less pronounced for state-controlled firms, for the firms in regulated industries, and for the firms with politically connected CEOs. Our findings suggest that, the higher is the extent of political influence, the benefit of CEO duality is less likely to outweigh the cost of CEO duality. As for the implication for policy-makers, the evidence also suggests that the proposal asking all listed firms to separate the role of CEO from board chairman may need more careful consideration.