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Board leadership structure and corporate headquarters location

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Abstract

This study examines empirically if corporate headquarters location matters for board leadership structure under different asymmetric information settings. We examine the impact of corporate headquarters location on CEO duality for the period 1998–2013. Using the Metropolitan Statistical Area (MSA) to define the location of corporate headquarters, we find that metropolitan firms are more likely to have CEO-Chairman duality than rural firms. Utilizing idiosyncratic risk and analyst forecast error or dispersion to proxy for information asymmetry, we find that metropolitan firms are more likely to have CEO-chairman duality than rural firms in the low information asymmetry setting. Our findings suggest that corporate headquarters location is an important determinant of board leadership structure.

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Notes

  1. For example, studies show that separate leadership is associated with higher information acquisition cost but more effective board monitoring (Fama and Jensen 1983; Jensen 1993; Lipton and Lorsch 1992; Core et al. 1999; Goyal and Park 2002). In the same vein, the literature suggests that dual leadership reduces information cost, leading to a better firm performance (Anderson and Anthony 1986; Brickley et al. 1997; Finkelstein and D’Aveni 1994; Adams et al. 2005; Larcker and Tayan 2011).

  2. We thank an anonymous reviewer for suggesting this proxy.

  3. This proxy is employed in many studies, such as Borokhovich et al. (1996), Huson et al. (2001), Lehn et al. (2004), Coles et al. (2008), and Linck et al. (2008).

  4. Results of using subsamples are not tabulated but are available upon request.

  5. Results of using subsamples are not tabulated but are available upon request.

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Authors and Affiliations

  1. Department of Finance, University of Wisconsin-La Crosse, La Crosse, WI, 54601, USA

    Nilakshi Borah

  2. University of Texas at Tyler, SCOB 360.05, 3900 University Blvd, Tyler, TX, 75799, USA

    Hui James

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  1. Nilakshi Borah
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  2. Hui James
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Correspondence to Nilakshi Borah.

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Borah, N., James, H. Board leadership structure and corporate headquarters location. J Econ Finan 44, 35–58 (2020). https://doi.org/10.1007/s12197-019-09475-7

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