This study examines the impact of CEO duality on board independence and extends the knowledge by exploring whether the type of firm, the presence of family blockholding, or concentrated founder ownership moderates this impact. The fixed-effect panel data analysis on a sample of 1132 listed Indian firms for the period 2001–2015 shows that CEO duality has a significantly positive association with board independence decisions. This result is in line with the alignment effect and shows that firms try to align their interest with minority shareholders and compensate the cost involved in CEO duality by increasing the independent directors on the board. We find that the effect of leadership structure differs according to the type of firm and presence of family blockholders. Business group firms dominated by family encourage board independence if firms have a CEO duality leadership structure. We support the theory of reputation since reputational concerns play an important role in family firms, and such firms are willing to forgo board control because their value is directly linked to their reputation. However, we do not find any impact in non-family business groups and state-owned firms. We also find that controlling shareholders control the board decision process by discouraging the presence of independent directors on the board, which is consistent with the entrenchment hypothesis. Moreover, on moderating controlling shareholding with CEO duality, we find that the entrenchment effect of controlling shareholders dominates the alignment effect of CEO duality. These results are more pronounced for firms with a low level of information cost and a high level of monitoring. This study develops key insights on duality leadership structure in an insider system and our findings suggest that investors should consider the type of firm and presence of family blockholders in the firm to understand the implication of firm-level governance.
