Leadership structure and firm performance: evidence from China

Mengran Duan and Tianyi Dong

Applied Economics Letters, 2024, vol. 31, issue 4, 300-306

Abstract: This study compares the unity-of-command principle with the shared-command principle based on China’s unique institutional background. Our findings show firms with higher power gap between chairman and CEO exhibit better performance, implying the unity-of-command principle is more effective for most organizations. However, the empirical results also show there is an optimal value for the power gap, as it becomes harmful for the firm performance after exceeding the threshold value. The results remain consistent after solving the endogeneity problem. Overall, our findings provide solid evidence for the debate on the unity-of-command principle and the shared-command principle.

Date: 2024
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DOI: 10.1080/13504851.2022.2132203

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