Leadership structure and firm performance: evidence from China

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.

KEYWORDS:

• Unity-of-command
• shared-command
• power gaps
• firm performance

JEL CLASSIFICATION:

• G32
• L23
• L25

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Research Foundation for Youth Scholars of Beijing Technology and Business University, China (Grant No. PXM2020_014213_000017)