Mergers and Acquisitions : CEO Duality, Operating Performance and Stock Returns

The paper provides evidence, in an emerging market context in the Pacific Basin, that the CEO duality leadership structure of a firm does impact the strategic decisions made by the firm. Specifically, firms that are run by CEO duality structure are perceived by the capital market to be better acquirers and their shareholders earn significantly higher abnormal returns than those of firms with separate CEO/Chairman roles. Firms with CEO duality produce better performance gain after M&A than their counterparts do. The result is robust with two stage least squares regression to account for possible endogeneity problem. The evidence suggests that the positive impacts of CEO duality on M&A results outweigh the agency costs of duality leadership, supportive of stewardship theory. Leadership structure of the acquiring firm and the size of equity ownership held by its CEO influence the choice of having a target firm with similar or different leadership structure. The paper adds to the understanding of how firm specific factors in emerging markets drive firms' strategic decisions