A quantitative study of the relationship between corporate leadership structure, country market status, and firm performance among industrial firms

Although the debate over separation of ownership and control is decades old, it still exists under the concepts of agency theory and stewardship theory. Interest in corporate reform began to grow in the 1980s following multiple corporate scandals, steering researchers to look at corporate leadership structure and its relationship with firm performance. Agency theory adopts the concept of separation of ownership and control, where advocates believe this facilitates more effective monitoring and control of the Chief Executive Officer (CEO). Stewardship theory adopts the concept that the CEO is a good steward and works collaboratively, where advocates believe the unity of command facilitates a better decision making process. By examining agency theory and stewardship theory, in terms of corporate leadership structure, researchers hope to determine the optimal corporate leadership structure for organizations. However, these studies have produced mixed and inconclusive results, indicating this knowledge gap still exists. The purpose of this dissertation was to examine agency theory and stewardship theory, in terms of independent leadership and CEO duality, respectively, by investigating the influence of corporate leadership structure and country market status (emerging market and developed market) on firm performance among industrial firms. The sample consisted of 318 industrial firms proportionately stratified by corporate leadership structure and country market status. Nine hypotheses were tested using a two-way ANOVA. The results indicated that there is no optimal leadership structure in terms of firm performance for industrial firms, where return on equity, return on assets, and earnings per share were the performance measures. First, the statistical analysis of the dependent variables revealed that corporate leadership structure does not influence country market status. Second, the statistical analysis indicated that there was no significant difference between CEO duality and independent leadership on the dependent variables. Lastly, the statistical analysis indicated that firms in emerging markets reported higher return on assets and return on equity than firms in developed markets. Regardless of the significant findings pertaining to the relationship between country market status and firm performance, there is no significant effect by corporate leadership structure. Overall, no optimal leadership structure was identified.