CEO Duality as a Double-Edged Sword: How Boards of Directors Balance Entrenchment Avoidance and Unity of Command

Finkelstein, Sydney; D'Aveni, Richard A.

doi:10.5465/256667

Cited by 406 publications

(519 citation statements)

References 51 publications

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“…Daily and Dalton (1994) argue that an outsider-dominated board could effectively counter CEO resistance to adopting aggressive strategies in the face of continuing organizational decline. Furthermore, boards dominated by outsiders are more likely to remove the CEO of a poorly performing firm (Finkelstein & D'Aveni, 1994). A stream of theoretical research shows that effectiveness of outside directors depends on the information environment (Harris & Raviv, 2008;Hermalin & Weisbach, 1998;Raheja, 2005).…”

Section: Governance and Corporate Survivalmentioning

confidence: 99%

“…While the monitoring role enshrined in agency cost theory is emphasized by Finkelstein and D'Aveni (1994), Adams and Ferreira (2007) implicitly stress resource dependence theory when they focus on the advisory role of the board. Furthermore, in their study of young entrepreneurial firms, Kroll et al (2007) invoke stewardship theory.…”

Section: Governance and Corporate Survivalmentioning

confidence: 99%

“…Brickley, Coles, and Jarrell (1997) argue that there are costs and benefits to separating the CEO and chairperson roles. Finkelstein and D'Aveni (1994) postulate that the choice of leadership structure reflects the board's effort to balance entrenchment avoidance with unity of command. Empirical evidence is, however, mixed on the relation between leadership structure and firm performance (Brickley et al, 1997;Dahya, 2004;Rechner & Dalton, 1991).…”

Section: Governance and Corporate Survivalmentioning

confidence: 99%

See 2 more Smart Citations

Board Structure and Survival of New Economy IPO Firms

Chancharat

Krishnamurti

Tian

2012

Corporate Governance

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Manuscript Type: Empirical Research Question/Issue: This study examines the relevance of currently accepted best practice recommendations regarding board structure on the survival likelihood of new economy initial public offering companies. We argue that industry context determines governance outcomes. Research Findings/Insights: We study 125 Australian new economy firms listed between 1994 and 2002. Each firm is tracked until the end of 2007 for monitoring their survival. We find that board independence is associated with an increase in the likelihood of corporate survival. We also find that the benefits of board independence increase at a decreasing rate. Theoretical/Academic Implications: The standard best practice recommendation of board independence stems from the monitoring role of directors and is based on agency theory. The results from our study suggest that the recommendation regarding board independence does not work well for new economy firms. While the agency theory based model implies a monotonic relation between board independence and performance, our research suggests that the relationship is nonlinear. This variation occurs because of increased monitoring costs faced by outsiders due to higher information asymmetry and complexity of new economy firms. Our empirical results suggest that inside directors play a complementary role to outsiders in mitigating firm failure. Practitioner/Policy Implications: Our research offers insights to policy makers who are interested in setting best practice standards regarding board structure. Our research suggests that firm/industry characteristics play a crucial role in determining the optimal board structure. In firms/industries where outsiders face significantly higher information processing costs, insiders can play a valuable complementary role to outsiders in enhancing the effectiveness of the board. Thus future hard or soft regulations related to board structure should consider industry context.

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Section: Governance and Corporate Survivalmentioning

confidence: 99%

Section: Governance and Corporate Survivalmentioning

confidence: 99%

Section: Governance and Corporate Survivalmentioning

confidence: 99%

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Board Structure and Survival of New Economy IPO Firms

Chancharat

Krishnamurti

Tian

2012

Corporate Governance

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“…Therefore, there must be evidence that the duality of corporate governance brings better returns for the firm (Finkelstein & D'Aveni, 1994;Martínez, 2004), but there is also some evidence that shows otherwise (Daily & Dalton, 1994;Judge, Naoumova, & Koutzevol, 2003) and others found that the results are mixed and inconclusive (Chowdhury & Geringer, 2001), then feel the need to further analyze these structures using best practices. From this follows the first premise:…”

Section: Human Resource Management and Financial Performance 1137mentioning

confidence: 99%

Corporate Governance Structure and Its Impact on Human Resource Management and Financial Performance

Pelayo-Maciel

Hernández²,

Serna-Gómez³

2012

CUBR

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In this paper, the authors discuss the impact of corporate governance structure on human resource management and financial performance in the context of Colombian business environment. For this purpose, the paper will analyze the concept of corporative governance and discuss the streams of thought that study both the structure of corporate governance as the behavior of managers, the agency theory and stewardship theory. The methodological development aims to test four models by using regression analysis. The results allow to identify that the structure of corporate governance and distinctive capabilities of human resource are positively related to company performance, but this does not explain the attitude steward of the CEO and collaboration systems.

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“…With increasing attention of the board's members, there is an increasing need for top managers to defend strategic decisions and moves through proposals to the board (Castaner and Kavadis 2013). Indeed, the vigilance of a board tends to increase when there is a higher percentage of external directors (Lim 2015), the CEO does not chair the board (Finkelstein and D'Aveni 1994;Kesner and Johnson 1990), the CEO does not appoint board members (Zajac and Westphal 1994), and ownership is very concentrated (Castaner and Kavadis 2013). In addition, top decision makers' task demands tend to increase when they are facing activist shareholders (Walls et al 2012).…”

Section: Managers' Task Demands and Top-down Attention Allocationmentioning

confidence: 99%