CEO duality and accounting-based performance in Egyptian listed companies: A re-examination of agency theory predictions

This paper aims at re-examining the predictions of agency theory with regard to the negative association between CEO duality (i.e. the Chief Executive Officer, CEO, serves also as the board chairman) and corporate performance. It also examines the role of other corporate governance mechanisms (board size, top managerial ownership and institutional ownership) as moderating variables in the relationship between CEO duality and corporate performance. Methodology/approach – This paper uses the financial statements for the year 2006 of most actively traded Egyptian companies to examine these predictions of agency theory. Moderated Regression Analysis is used to analyse the empirical data. Findings – The findings indicated that the hypothesized relationships between CEO duality, the moderating variables and corporate performance have changed. For companies characterized by large boards and low top management ownership, corporate performance is negatively affected by CEO duality and positively impacted by institutional ownership. Research limitations/implications – A limitation of this study is the use of accounting-based performance measures because of the expected earnings management behaviours by CEOs. Practical implications – The Egyptian Capital Market Authority should adopt a reform programme to encourage Egyptian listed companies to modify their governance structures by increasing top management ownership and reducing board sizes before incorporating the new governance rules into the listing requirements. Originality/value of paper – The paper contributes to the literature on corporate governance and corporate performance by introducing a framework for identifying and analysing moderating variables that affect the relationship between CEO duality and corporate performance