Skip to main content

CEO Duality and Firm Performance during China's Institutional Transitions

  • Mike W. Peng (a1), Shujun Zhang (a2) and Xinchun Li (a2)

Does CEO duality – the practice of one person serving both as a firm's CEO and board chair – contribute to or inhibit firm performance? Agency theory suggests that CEO duality is bad for performance because it compromises the monitoring and control of the CEO. Stewardship theory, in contrast, argues that CEO duality may be good for performance due to the unity of command it presents. The empirical evidence, largely from developed economies, is largely inconclusive. This article joins the debate by extending empirical work to the largely unexplored context of institutional transitions. Our findings, based on an archival database covering 403 publicly listed firms and 1,202 company-years in China, offer stronger support for stewardship theory and relatively little support for agency theory. Finally, we also call for a contingency perspective to specify the nature of conditions such as resource scarcity and environmental dynamism under which CEO duality may be especially valuable.

Hide All
Au, K., Peng, M. W., & Wang, D. 2000. Interlocking directorates, firm strategies, and performance in Hong Kong: Towards a research agenda. Asia Pacific Journal of Management, 17(1): 2947.
Bai, C., Liu, Q., Lu, J., Song, F., & Zhang, J. 2004. Corporate governance and market valuation in China. Journal of Comparative Economics, 32: 599616.
Baliga, B., Moyer, N., & Rao, R. 1996. CEO duality and firm performance: What's the fuss. Strategic Management Journal, 17: 4153.
Bourgeois, L. 1981. On the measurement of organizational slack. Academy of Management Review, 6: 2939.
Boyd, B. 1995. CEO duality and firm performance: A contingency model. Strategic Management Journal, 16: 301312.
Brickley, J., Coles, J., & Jarrell, G. 1997. Leadership structure: Separating the CEO and chairman of the board. Journal of Corporate Finance, 4: 189220.
Cha, L. 2001. The future of China ‘s capital markets and the role of corporate governance. Speech delivered at the China Business Summit, Shanghai, April 18. [Cited July 14, 2001.] Available from URL:
Clarke, D. C. 2005. The independent director in Chinese corporate governance. Working paper. University of Washington School of Law, Seattle, Wash.
CSRC (China Securities Regulatory Commission). 2002. Code of corporate governance for listed companies in China. Beijing: CSRC. [Cited June 26, 2002.] Available from URL:
CSRC (China Securities Regulatory Commission). 2004. China's securities and futures markets. Beijing: CSRC. [Cited April 12, 2005.] Available from URL:
Cull, R., & Xu, L. C. 2005. Institutions, ownership, and finance: The determinants of profit reinvestment among Chinese firms. Journal of Financial Economics, 77: 117146.
Cyert, R., & March, J. 1963. A behavioral theory of the firm. Upper Saddle River, N.J.: Prentice-Hall.
Dalton, D., Daily, C., Ellstrand, A., & Johnson, J. 1998. Meta-analytic reviews of board composition, leadership structure, and financial performance. Strategic Management Journal, 19: 269290.
Dess, G., & Beard, D. 1984. Dimensions of organizational task environments. Administrative Science Quarterly, 29: 5273.
Donaldson, L., & Davis, J. 1991. Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16: 4964.
Fama, E., & Jensen, M. 1983. Separation of ownership and control. Journal of Lavu and Economics, 28: 301325.
Finkelstein, S., & D'Aveni, R. 1994. CEO duality as a double-edged sword: How boards of directors balance entrenchment avoidance and unity of command. Academy of Management Journal, 37: 10791108.
Harrigan, K. R. 1983. Research methodologies for contingency approaches to business strategy. Academy of Management Review, 8: 398405.
Judge, W. Q., Naoumova, L., & Koutzevol, N. 2003. Corporate governance and firm performance in Russia: An empirical study. Journal of World Business, 38: 385396.
Kuhn, T. S. 1970. The structure of scientific revolutions. Chicago, Ill.: University of Chicago Press.
Lawrence, P., & Lorsch, J. 1967. Organization and environment. Boston, Mass.: Harvard Business School Press.
Li, M., & Simerly, R. L. 1998. The moderating effect of environmental dynamism on the ownership and performance relationship. Strategic Management Journal, 19: 169179.
Li, Y., Sun, Y., & Liu, Y. 2006. An empirical study of SOEs' market orientation in transitional China. Asia Pacific Journal of Management, 23: 93113.
Luo, Y., & O'Connor, N. 1998. Structural changes to foreign direct investment in China: An evolutionary perspective. Journal of Applied Management Studies, 7: 95109.
Luo, Y., & Peng, M. W. 1999. Learning to compete in a transition economy: Experience, environment, and performance. Journal of International Business Studies, 30(2): 269296.
March, J. 2005. Parochialism in the evolution of a research community: The case of organization studies. Management and Organization Review, 1(1): 522.
Meyer, K. E. 2006. Asian management research needs more self-confidence. Asia PacificJournal of Management, 23: 119137.
Ministry of Commerce (MOFCOM). 2006. 2005 report on foreign direct investment in China. Beijing: MOFCOM. [Cited September 11, 2006.] Available from URL:
Peng, M. W. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28(2): 275296.
Peng, M. W. 2004. Outside directors and firm performance during institutional transitions. Strategic Management Journal, 25(4): 453471.
Peng, M. W. 2005. From China strategy to global strategy. Asia Pacific Journal of Management, 22(2): 123141.
Peng, M. W., Au, K., & Wang, D. 2001. Interlocking directorates as corporate governance in Third World multinationals: Theory and evidence from Thailand. Asia Pacific Journal of Management, 18(2): 161181.
Peng, M. W., Buck, T., & Filatotchev, I. 2003. Do outside directors and new managers help improve firm performance? An exploratory study in Russian privatization. Journal of World Business, 38(4): 348360.
Peng, M. W., & Heath, P. 1996. The growth of the firm in planned economies in transitions: Institutions, organizations, and strategic choices. Academy of Management Review, 21(2): 492528.
Peng, M. W., & Luo, Y. 2000. Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43(3): 486501.
Peng, M. W., Wang, D., & Jiang, Y. 2007. An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies (in press).
Peng, M. W., Zhou, Y., & York, A. 2006. Behind make or buy decisions in export strategy: A replication and extension of Trabold. Journal of World Business, 41(3): 289300.
Pfeffer, J., & Salancik, G. 1978. The external control of organizations. New York, N.Y.: Harper & Row.
Pi, L., & Timme, A. 1993. Corporate control and bank efficiency. Journal of Banking and Finance, 17: 515530.
Rechner, P., & Dalton, D. 1991. CEO duality and organizational performance: A longitudinal analysis. Strategic Management Journal, 12: 155160.
Roth, K., & Kostova, T. 2003. Organizational coping with institutional upheaval in transition economies. Journal of World Business, 38: 314330.
Singh, K., Ang, S. H., & Leong, S. M. 2003. Increasing replication for knowledge accumulation in strategy research. Journal of Management, 29: 533549.
Song, F., Yuan, P., & Gao, F. 2006. Does large state shareholder affect the governance of Chinese board of directors? Working paper, Tsinghua University (In Chinese.)
Tan, R. S. K., Chang, P. L., & Tan, T. W. 2001. CEO share ownership and firm value. Asia Pacific Journal of Management, 18: 355371.
Tan, J., & Peng, M. W. 2003. Organizational slack and firm performance during economic transitions: Two studies from an emerging economy. Strategic Management Journal, 24: 12491263.
Tian, J. J., & Lau, C.-M. 2001. Board composition, leadership structure, and performance in Chinese shareholding companies. Asia Pacific Journal of Management, 18: 245263.
Thompson, J. D. 1967. Organizations in action. New York N.Y.: McGraw-Hill.
Tsang, E., & Kwan, K. 1999. Replication and theory development in organizational science. Academy of Management Review, 24: 759780.
Tsui, A. 2006. Contextualization in Chinese management research. Management and Organization Review, 2: 113.
Worrell, D., Nemec, C., & Davidson, W. 1997. One hat too many: Key executive plurality and shareholder wealth. Strategic Management Journal, 18: 499507.
Westphal, J. D., & Zajac, E.J. 1995. Who shall govern? CEO/board power, demographic similarity, and new director selection. Administrative Science Quarterly, 40: 6083.
Wright, M., Filatotchev, I., Hoskisson, R. E., & Peng, M. W. 2005. Strategy research in emerging economies: Challenging the conventional wisdom. Journal of Management Studies, 42(1): 133.
Wu, S., Liu, Z., & Fan, J. 2001. An empirical study of the relationship between nonexecutive directors and firm performance. Zhongguo Gongye Jingji (China Industrial Economy), 9: 6976. (In Chinese.)
Xu, X., & Wang, Y. 1999. Ownership structure and corporate governance in Chinese stock companies. China Economic Review, 10: 7598.
Yeung, H. W. C. 2006. Change and continuity in Southeast Asian ethnic Chinese business. Asia Pacific Journal of Management, 23: 229254.
Young, M., Peng, M. W., Ahlstrom, D., Bruton, G., & Jiang, Y. 2007. Corporate governance in emerging economies: A review of the principal-principal perspective. Journal of Management Studies (in press).
Yu, D.-Z., & Gu, L.-Pv. 2002. Leadership structure of corporation and performance. Zhongguo Gongye Jingji (China Industrial Economy), February, 7078. (In Chinese.)
Zhou, C., Delios, A., & Yang, J. Y. 2002. Locational determinants of Japanese foreign direct investment in China. Asia Pacific Journal of Management, 19: 6386.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Management and Organization Review
  • ISSN: 1740-8776
  • EISSN: 1740-8784
  • URL: /core/journals/management-and-organization-review
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Full text views

Total number of HTML views: 0
Total number of PDF views: 73 *
Loading metrics...

Abstract views

Total abstract views: 333 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 24th May 2018. This data will be updated every 24 hours.