Should Chairman and CEO Be Separated? Leadership Structure and Firm Performance in Switzerland

We investigate the valuation effects of leadership structure in Switzerland where, in contrast to the U.S., a separation of the CEO and chairman functions is common. Consistent with the majority of prior research focusing on the U.S., we find no evidence of a systematic and significant difference in valuation between firms with combined and firms with separated functions. We also investigate whether leadership structure is related to firm-level corporate governance characteristics and find a similar curvilinear relationship between leadership structure and managerial shareholdings as is observed between firm value and managerial shareholdings. A possible interpretation is that agency costs associated with a combined function are mitigated by a higher incentive alignment of the CEO/chairman through an adequate level of managerial shareholdings.