Impact of Corporate Governance on Chief Executive Officer (CEO) Duality, Evidence from Iran

The corporate governance is assumed to promote fairness, transparency and accountability in the economic firms. These measures are most important criteria for business activities of any economic system. If the Chief Excecutive Officer acts simultaneously as chairman or assistant chairman of the Board of Directors, he may potentially be bestowed upon the vested authority to run the firm, and this structure of duality will allow him per se to control the flow of information accessible to other Board Members, effectively. As a result, he may prevent any efficient supervision to be performed in the firm. However, the corporate governance is a mechanism which can tackle the agency problem for ensuring that the shareholders funds could not be expropriated or wasted upon the unprofitable activities. Thus, In this paper an attempt is made to investigate the impact of some important Components of corporate governance, including concentration of ownership, percentage share of institutional ownership and percentage share of ownership by Board Members on selection of Chief Executive Officer as chairman or assistant chairman of Board of Directors of certain companies listed in the Tehran Stock Exchange. For this purpose, we have utilized the panel data of 71 firms for the period of 12 years i, e 2001-2013, viz-a-viz applying the Logistic Regression Model for testing the hypothesis. The results prima facie indicate that there is a positive and significant relation between concentration of ownership, Percentage share of institutional ownership, and debt ratio as scale variables and Chief Executive Officer (CEO) Duality (i.e the CEO serves also as the Board Chairman), as dependent variable. On the contrary, there is negative but significant relation between Percentage share of ownership by Board Members and Chief Executive Officer Duality. Furthermore, we have found that there is no any significant relation between the size of the company and Chief Executive Officer Duality, pro rata.