Governance Structure and Firm Performance: A Competitive Environment Perspective

Date of Submission


Document Type


Degree Name

Doctor of Science in Management Systems (Sc.D.)




Robert M. Rainish

Committee Member

Steven J. Shapiro

Committee Member

Wentworth D. Boynton

LC Subject Headings

Corporate governance, Competition

Call No. at the Univ. of New Haven Library

AS 36 N290 Mgmt. Syst. 2007 no. 5


Recent developments in corporate governance reform have led firms to rethink the structure of their boardrooms. The widely accepted form of CEO duality, whereby the CEO is also the chairperson of the board of directors, is giving way to a non-duality structure in which the CEO and chairperson of the board of directors are different persons. In addition, a board structure that has a majority of outside and independent directors is gaining preference among corporate governance reform advocates because it better promotes monitoring and controlling of management actions.

The purpose of this study was to investigate the relationship between corporate governance structure (board leadership structure and board composition) and firm performance in different competitive environment contexts. Agency theory and uncertainty level of competitive environment were used to explain the study. Different competitive environments could require different characteristics of board leadership and different proportions of board composition.

Data derived from 719 firms in eight industry groups over the three competitive environments of low-growth, medium-growth and high-growth were used in testing related hypotheses. Approximately 60% of 400 firms selected for this study had the dual governance structure for the three-year period. 85% of 300 organizations had outsider-dominated structure for the same period. Financial performances were assessed by both market and accounting performance measures.

Multivariate analysis (MANOVA) was utilized in this study and significant differences were found in NPM, ROA and ROR. Univariate and fine-grained testing of board leadership structure grouped by competitive environments was also performed. The outcome partly supports the agency theory argument, which contends that the dual leadership structure promotes CEO entrenchment by reducing board-monitoring effectiveness. The result reveals that independent board leadership structure as well as outsider-dominated structure significantly improves the firm’s financial performance, especially in low-growth and high-growth environments where the level of environmental uncertainty is high. However, the tests suggest some advantage in combining CEO and chairman of the board roles for a low complexity environment.