DP8936 Competition for Managers and Corporate Governance

Author(s): Viral V. Acharya, Marc Gabarro, Paolo Volpin
Publication Date: April 2012
Date Revised: May 2018
Keyword(s): CEO Duality, competition for managers, corporate governance
JEL(s): G3, G38
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8936

Why do more than half of S&P 500 firms have duality, i.e., a CEO who is also the Chairman of the Board? We show that US firms use duality as a tool to compete for CEOs. Specifically, we find that duality changes are concentrated at times when new CEOs are hired and firms are more likely to choose duality when hiring a higher quality CEO. This finding is robust to different measures of CEO ability and types of succession plans. We also show that the correlation between duality and CEO quality is stronger in industries with more competition for CEOs.