Corporate Governance Mechanisms and Financial Performance: CEO Duality in Shipping Firms

The paper investigates the impact of CEO duality/separation on the financial performance of shipping firms. This is an interesting case sector, as a growing number of shipping companies are seen to go public on international capital markets, shifting away from their founding family-run model. Agency and stewardship theories put forward conflicting arguments in favor or against CEO duality/separation. CEO separation (choice of different persons to serve as CEO and Chairman) is argued to be a good corporate governance practice for shareholders’ interests, facilitates the effective monitoring and control of top management and improves the financial performance of the firm (agency theory). On the other hand, CEO duality establishes a uniform command chain and minimizes conflicting decision-taking and also supports financial performance (stewardship theory). Past empirical findings have produced contradictory evidence as to CEO duality/separation implications for financial performance. These issues have not been adequately researched in shipping business and the paper attempts to partially fill this gap. CEO separation is found to exert a positive impact on the financial performance of shipping firms, in support of agency theory.