Determinants Of Firm Leadership Structure

Abstract

In this study, we seek to ascertain some of the factors that determine the leadership structure that a firm chooses to adopt. Our main empirical finding is that both share ownership by officers and directors and by blockholders is inversely related to the probability that a firm will have a unitary leadership structure. These results imply that officers, directors, and blockholders believe that a dual leadership structure is the optimal leadership structure for most firms and that greater share ownership by these groups motivates them to see that the firm adopts that optimal leadership structure. We are also able to confirm Brickley, Coles, and Jarrell’s (1997) finding that CEO tenure in office is directly related to the probability that a firm will have a unitary leadership struc- ture. This finding is consistent with the pass-the-baton theory of CEO/Chair succession proposed Vancil (1987).