Top

Journal of Economics and Finance

Published in:

02-04-2019

Board leadership structure and corporate headquarters location

Authors: Nilakshi Borah, Hui James

Published in: Journal of Economics and Finance | Issue 1/2020

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

This study examines empirically if corporate headquarters location matters for board leadership structure under different asymmetric information settings. We examine the impact of corporate headquarters location on CEO duality for the period 1998–2013. Using the Metropolitan Statistical Area (MSA) to define the location of corporate headquarters, we find that metropolitan firms are more likely to have CEO-Chairman duality than rural firms. Utilizing idiosyncratic risk and analyst forecast error or dispersion to proxy for information asymmetry, we find that metropolitan firms are more likely to have CEO-chairman duality than rural firms in the low information asymmetry setting. Our findings suggest that corporate headquarters location is an important determinant of board leadership structure.

previous article Monetary policy, social capital, and corporate investment

next article Analyzing the impact of workers’ remittances on household consumption in Latin American and Caribbean Countries

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

For example, studies show that separate leadership is associated with higher information acquisition cost but more effective board monitoring (Fama and Jensen 1983; Jensen 1993; Lipton and Lorsch 1992; Core et al. 1999; Goyal and Park 2002). In the same vein, the literature suggests that dual leadership reduces information cost, leading to a better firm performance (Anderson and Anthony 1986; Brickley et al. 1997; Finkelstein and D’Aveni 1994; Adams et al. 2005; Larcker and Tayan 2011).

We thank an anonymous reviewer for suggesting this proxy.

This proxy is employed in many studies, such as Borokhovich et al. (1996), Huson et al. (2001), Lehn et al. (2004), Coles et al. (2008), and Linck et al. (2008).

Results of using subsamples are not tabulated but are available upon request.

Adams RB, Ferreira D (2007) A theory of friendly boards. J Financ 62(1):217–250CrossRef

Adams RB, Almeida H, Ferreira D (2005) Powerful CEOs and their impact on corporate performance. Rev Financ Stud 18:1403–1432CrossRef

Alam ZS, Chen MA, Ciccotello CS, Ryan HE (2014) Does the location of directors matter? Information acquisition and board decisions. J Financ Quant Anal 49:131–164CrossRef

Anderson CA, Anthony RN (1986) The new corporate directors: insights for board members and executives. Wiley, New York

Boone A, Field L, Karpoff J, Raheja C (2007) The determinants of corporate board size and composition: an empirical analysis. J Financ Econ 85:66–101CrossRef

Booth J, Deli D (1999) On executives of financial institutions as outside directors. J Corp Finan 5:227–250CrossRef

Borokhovich K, Parrino R, Trapani T (1996) Outside directors and CEO selection. J Financ Quant Anal 31:377–397CrossRef

Brickley JA, Coles JL, Jarrell G (1997) Leadership structure: separating the CEO and chairman of the board. J Corp Finan 3:189–220CrossRef

Coles J, Daniel N, Naveen L (2008) Boards: does one size fit all. J Financ Econ 87:329–356CrossRef

Core JE, Holthausen RW, Larcker DF (1999) Corporate governance, chief executive officer compensation, and firm performance. J Financ Econ 51:371–406CrossRef

Donaldson L, Davis JH (1991) Stewardship theory or agency theory: CEO governance and shareholder returns. Aust J Manag 16:49–64CrossRef

Duchin R, Matsusaka JG, Ozbas O (2010) When are outside directors effective. J Financ Econ 96:195–214CrossRef

Eisenhardt KM (1989) Agency theory: an assessment and review. Acad Manag Rev 14:57–74CrossRef

Faleye O (2007) Does one hat fit all? The case of corporate leadership structure. J Manag Gov 11:239–259CrossRef

Fama E, Jensen M (1983) Separation of ownership and control. J Law Econ 26:301 325

Fee C, Hadlock C (2004) Managerial turnover across the corporate hierarchy. J Account Econ 37:3–38CrossRef

Fich EM, Shivdasani A (2006) Are busy boards effective monitors? J Financ 61:689–724CrossRef

Finkelstein S, D’Aveni RA (1994) CEO duality as a double-edged sword: how board of directors balance entrenchment avoidance and unity of command. Acad Manag J 37:1079–1108

Gao W, Ng L, Wang Q (2011) Does corporate headquarters location matter for firm capital structure? Financ Manag 40:113–138CrossRef

Goyal VK, Park CW (2002) Board leadership structure and CEO turnover. J Corp Finan 8:49–66CrossRef

Hermalin B, Weisbach M (1998) Endogenously chosen boards of directors and their monitoring of the CEO. Am Econ Rev 88:96–118

Hou K, Moskowitz TJ (2005) Market frictions, price delay, and the cross-section of expected returns. Rev Financ Stud 18:981–1020CrossRef

Huson M, Parrino R, Starks L (2001) Internal monitoring mechanism and CEO turnover: a long-term perspective. J Financ 56:2265–2297CrossRef

Jensen M (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76:323–329

Jensen M (1993) The modern industrial revolution, exit, and the failure of internal control systems. J Financ 48:831–880CrossRef

John K, Knyazeva A, Knyazeva D (2011) Does geography matter? Firm location and corporate payout policy. J Financ Econ 101:533–551CrossRef

Krause R, Semadeni M, Cannella AA Jr (2014) CEO duality: a review and research agenda. J Manag 40:256–286

Krishnaswami S, Subramaniam V (1999) Information asymmetry, valuation, and the corporate spin-off decision. J Financ Econ 53:73–112CrossRef

Larcker D, Tayan B (2011) Corporate governance matters: a closer look at organizational choices and their consequences. In: Upper Saddle River. Pearson Education Inc, New Jersey

Lehn K, Patro S, Zhao M (2004). Determinants of the size and structure of corporate boards: 1935–2000. Unpublished working paper, University of Pittsburgh

Linck J, Netter J, Yang T (2008) The determinants of board structure. J Financ Econ 87:308–328CrossRef

Lipton M, Lorsch J (1992) A modest proposal for improved corporate governance. The Business Lawyer 48:59–77

Loughran T (2008) The impact of firm location on equity issuance. Financ Manag 37:1–21CrossRef

Loughran T, Schultz P (2005) Liquidity: urban vs. rural firms. J Financ Econ 78:341–374CrossRef

Raheja C (2005) Determinants of board size and composition: a theory of corporate boards. J Financ Quant Anal 40:283–306CrossRef

Uysal VB, Kedia S, Panchapagesan V (2008) Geography and acquirer returns. J Financ Intermed 17:256–275CrossRef

Zhang J, Chung J (2018) Does geographical location matter for managerial compensation design. J Econ Financ 42:1–32CrossRef

Title: Board leadership structure and corporate headquarters location
Authors: Nilakshi Borah
Hui James
Publication date: 02-04-2019
Publisher: Springer US
Published in: Journal of Economics and Finance / Issue 1/2020
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI: https://doi.org/10.1007/s12197-019-09475-7

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 1/2020

Monetary policy, social capital, and corporate investment

Is the empirical relationship between hours and productivity effected by corporate profits?

Converting remittances to investment: a dynamic optimal policy

Real estate prices and banking performance: evidence from Canada

Analyzing the impact of workers’ remittances on household consumption in Latin American and Caribbean Countries

Structural change in Asia, the real effective exchange rate, and agricultural productivity