Firm performance and the adoption of a co-CEO structure: Evidence from Korea

In this study, we examine the relationship between past firm performance and the likelihood of co-CEO adoption. Using Korean data for the period 2003 to 2018, we find that poorly performing firms are more likely to appoint multiple CEOs and adopt shared leadership. This provides evidence that owners add CEOs to the firm in order to penalize the poor performance of the incumbent sole CEO. In addition, a comparison of firms that replace an existing sole CEO with another versus those that newly adopt a co-CEO structure shows that firms exhibiting extremely bad performance are more likely to choose the former option. Furthermore, we divide the sample by type of co-CEO structure and find that poor performance by a sole CEO is more likely to be a cause of the type that indicates a dilution of authority for the existing sole CEO.