Does Power Differential between Board Chair and CEO Matter?
Duan Mengran, PhD; Wang Ruihua, PhD

Abstract
Different with western companies, the board chair is the top decision maker of the business and the CEO is the executive of the decision among Chinese companies. So we assess the degree to which power differential between board chair and CEO may influence their companies’ capital structure. To test power gap effect, we focus on firms in which the CEO and board chair are separated. Using a China sample of 8,022 firm-year observations, our results indicate that increasing power differential between board chair and CEO is negatively associated with capital structure deviation degree and positively with capital structure adjustment speed. We also find this relationship is more significant when the firm is non-state-owned enterprise. Our results add to the literature examining the role and influence of power differential and suggest power gap between board chair and CEO may be an efficient governance mechanism to companies.

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