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CEO duality and agency cost: evidence from Bangladesh

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Abstract

This study examines if Chief Executive Officer (CEO) duality reduces the firms’ agency cost in Bangladesh. The agency costs are measured as two efficiency ratios: ‘expense ratio’ and ‘asset utilization ratio’. The finding is that, there is no significant relationship between CEO duality and agency costs. These findings imply that, duality may have given the CEOs enormous powers; it may have reduced the check and balance or board’s ability to exercise the governance (monitoring) function, which is not helpful to enhance firm efficiency. This study contributes to the global debate on CEO duality and provides a new avenue of knowledge on CEO duality and firm efficiency in the context of an emerging economy.

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Notes

  1. France has a mixture of unitary and two-tier board system (see Charreaux and Wirtz 2007).

  2. Bangladesh was a former British colony and it inherited the common legal systems based on English common law (as opposed to civil law). The two-tier board is common in civil law countries (Rose 2005).

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  1. School of Accounting, Economics and Finance, University of Southern Queensland, Toowoomba, QLD, 4350, Australia

    Afzalur Rashid

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Rashid, A. CEO duality and agency cost: evidence from Bangladesh. J Manag Gov 17, 989–1008 (2013). https://doi.org/10.1007/s10997-012-9213-x

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