The Role of Board Leadership Structure in Achieving Financial Flexibility: Evidence from an Emerging Economy

The Role of Board Leadership Structure in Achieving Financial Flexibility: Evidence from an Emerging Economy | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article The Role of Board Leadership Structure in Achieving Financial Flexibility: Evidence from an Emerging Economy Md Rashidul Islam, Rehnuma Hoque Moutushi, Monirul Alam Hossain, and 1 more This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7384044/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 7 You are reading this latest preprint version Abstract The primary objective of this study is to explore the impact of the board leadership structure (CEO duality and CEO and executives' compensation) on a firm's financial flexibility, particularly in an emerging economy context. A sample of Chinese A-Share-listed manufacturing companies was utilized for this investigation. Unbalanced panel data from 2007 to 2022, comprising 14,088 firm-year observations from the C.S.M.A.R. database, was analyzed using the statistical software STATA. The results indicate that CEO duality has a negative effect on a firm's financial flexibility, while organizations with lower-paid CEOs and executives exhibit a positive impact. Conversely, firms with highly compensated CEOs and executives show no significant effect on financial flexibility. The study also suggests that the dual role of the CEO is a consequence of weak corporate governance practices, leading to ineffective board oversight of managers. Consequently, a company's financial flexibility may suffer due to mismanagement of spending liquidity. Additionally, firms with lower-paid CEOs tend to be more conservative, risk-averse, and inclined to accumulate assets to enhance financial flexibility compared to those with highly-paid CEOs. These findings are valuable for policymakers as they offer insights into achieving financial flexibility through effective corporate governance, which is crucial for crisis management and operational continuity. Companies led by lower-paid CEOs are more likely to build up cash reserves to enhance financial flexibility compared to their counterparts. Business and commerce/Business and management Social science/Business and management Earth and environmental sciences/Environmental social sciences Business and commerce/Finance Social science/Finance CEO Duality Board Leadership Structure Financial Flexibility CEO and Executive Compensation Emerging Economies China Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Under Review Version 1 posted Reviews received at journal 22 Oct, 2025 Reviewers agreed at journal 01 Oct, 2025 Reviewers invited by journal 01 Oct, 2025 Editor assigned by journal 30 Sep, 2025 Editor invited by journal 27 Sep, 2025 Submission checks completed at journal 25 Sep, 2025 First submitted to journal 25 Sep, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. 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