The Governance Puzzle: Unravelling the Effects of CEO Duality on CEO Turnover in a New Era : An empirical study of the effects of CEO Duality on the sensitivity of CEO Turnover to Firm Performance for companies in the S&P 500 in the period 2017 2022
Abstract
This thesis examines whether combining the CEO and Chairman of Board of Directors titles
in one individual influences the board's ability to remove poorly performing CEOs. We use a
pooled logit regression analysis on a sample of S&P 500 firms from 2017 to 2022 to
accomplish this goal. Our primary finding suggests a significant decrease in the sensitivity of
CEO turnover to firm performance when a single individual holds the CEO and Chairman of
the Board roles. By including board structure variables in the analysis, we find that the larger
board size, enhanced gender diversity, and higher board independence within the board
increase the likelihood of CEO turnover. Our findings concerning board independence and
gender diversity are consistent with the prior literature, indicating that boards with lower
independence and diversity are less effective in removing underperforming CEOs as a
disciplinary measure. However, our study yields an unforeseen outcome, as it reveals a
positive correlation between board size and the probability of CEO replacement. This thesis
contributes to the existing literature by comparing the efficiency of combining or separating
the CEO and Chairman roles in light of recent legislative reforms.