When the Main Owner is the Board Chair: Too Much of a Good Thing for Stakeholders and Firm Growth
Type
conference paper
Date Issued
2024
Author(s)
Abstract
We study ‘owner duality’, hence when an individual is the largest owner of a firm and simultaneously serves as the firm’s board chair. To explore the firm growth implications of owner duality, we analyze a sample of publicly listed U.S. firms under control of individual owners. Upon dissecting owner duality into its two constituent elements, namely ownership concentration and board chair position, we find that ownership concentration in the hands of individuals by itself promotes firm growth. However, when ownership concentration is combined with the board chair position, firm growth suffers. Examining the causal mechanism underlying this negative effect, we find that owner duality engenders controversies with non-shareholding stakeholders, which harms their commitment to the firm and undermines growth. We find that executive ownership is effective while board independence is ineffective in curbing the growth penalty tied to owner duality. Our study introduces the concept of owner duality to the literature and adds to the new stakeholder theory of the firm.
Language
English