Determinants And Economic Consequences Of Corporate Leadership Structure

Based on the institutional and regulatory background of China, this paper uses the sample of 11,004 firm-years from the securities market of China during 1995 to 2006 to examine the determinants and consequences of corporate leadership structure. According to the results of this paper, the leadership structure is determined by both external and internal factors. Dual leadership (two positions combined) is negatively related to the regulatory policy and positively related to the information asymmetry in the firm and CEO ability. As for the consequences of leadership structure, when no external regulation exists, there is no significant relationship between corporate performance and dual leadership. But when external regulation requires separating the two roles, there is a significant positive relationship between corporate performance and dual leadership. This shows that the regulatory policy of the government breaks the equilibrium of firms to make optimal economic decisions according to their own characteristics. Forcing firms to separate the two roles of board chairman and CEO is not beneficial for the optimization of governance structure and improvement of corporate performance.