This paper seeks to examine the relationship between the CEO duality (one person serving the role of both chairman of the board and CEO) and firm performance. Existing literature on CEO duality is based on two theories of corporate governance. While agency theory suggests that CEO duality negatively affects performance, stewardship theory favors CEO duality and argues that it positively impacts the firm performance. The present paper adds to the existing literature by employing panel data of 145 non-financial companies listed on National Stock Exchange of India for a period of five years, i.e., 2008-2012. Firm performance has been measured using Tobin’s Q as a market-based measure, and Return on Equity (ROE) as accountingbased measure. Panel data is analyzed using fixed effect within and Least Square Dummy Variable (LSDV) model, random effect model and Feasible Generalized Least Square (FGLS) model. The paper concludes that when Tobin’s Q is used as performance measure, the presence of CEO duality has a negative impact on firm performance. In case of ROE, the relationship is negative with fixed effect model and significantly negative with FGLS model.

The corporate scandals at big organizations such as Enron, WorldCom, One.Tel, Tyco, HealthSouth and others have brought the attention of the regulators towards the concept of corporate governance the world over. This eventually has led to the need for effective corporate governance mechanisms in recent years. The corporate governance mechanisms studied over the decades include the board structure (board size, board composition, board independence, frequency of board meetings, CEO duality) and the ownership structure. The concept of CEO duality is very closely related to the issues related to corporate governance. CEO duality refers to the board leadership structure in terms of whether the CEO and the chairman is the same person or not. CEO duality is based on two approaches from the professional theories of corporate governance—agency theory and stewardship theory. The effectiveness of CEO duality as a corporate governance mechanism has opposite predictions with these two theories of corporate governance.

Corporate Governance Journal, CEO Duality, Firm Performance, Least Square Dummy Variable (LSDV), Return on Equity (ROE), Feasible Generalized Least Square (FGLS), Return on Investment (ROI), Panel Data Approach.