Chair–CEO trust and firm performance

Jiayi Zheng and Yushu Zhu

Australian Journal of Management, 2022, vol. 47, issue 1, 163-198

Abstract: This study investigates whether trust between a corporation’s board chair and the CEO affects firm performance. After using a unique survey data set of regional trustworthiness from China to measure this trust, we find a positive relationship between trust and the performance of Chinese companies from 2000 to 2016. Additional test results suggest that the relationship is causal. Further results show that the positive trust-performance effect is more evident for firms with greater advisory needs and boards that can deliver high-quality advice. Finally, we find supporting evidence to our conjecture that the Chair–CEO trust increases firm value by improving the board advisory results, including value-adding decisions of R&D and merger and acquisition. JEL Classification: G32, G34, G41

Keywords: Advisory role; firm performance; merger and acquisition; R&D; social trust (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:47:y:2022:i:1:p:163-198

DOI: 10.1177/0312896220981109

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