CEO duality in family firms: implications for earnings management and firm performance in Thai market

Purpose: As the debate over CEO duality’s impact on firm performance is still ongoing, the purpose of this study is to redefine CEO duality in Thai family firms and examine its impact on the relationship between earnings management and firm performance. Design/methodology/approach: This study uses a sample of 1,360 firm-year observations from listed firms on the Stock Exchange of Thailand. A fixed effect regression is used to obtain the empirical results. The results of this study are further validated using two-stage least squares estimation, subsample regression and an alternative measure of family firms. Findings: This study finds that firms with CEO duality are more likely to engage in REM, supporting Agency Theory. However, family-controlled firms with CEO duality engage less in REM in pursuit of firm performance. This study’s findings highlight the potential benefits of CEO duality in family firms as a mechanism to support Socioemotional Wealth of the controlling family. Therefore, the mandatory ban on CEO duality may have unintended consequences for family firms. Originality/value: This paper provides further evidence on the impact of CEO duality on the relationship between earnings management and firm performance in Thailand’s family-dominated stock market. A new definition of CEO duality is proposed, including firms where the CEO is related to the chair of the board. This boarder definition provides more comprehensive measurement compared to the traditional definition which may fail to capture the full scope of influence exerted by controlling family, as they may obscure CEO duality by appointing individuals with kinship ties to the CEO as the chair of the board.