Chair–CEO trust and firm performance

This study investigates whether trust between a corporation’s board chair and the CEO affects firm performance. After using a unique survey data set of regional trustworthiness from China to measure this trust, we find a positive relationship between trust and the performance of Chinese companies from 2000 to 2016. Additional test results suggest that the relationship is causal. Further results show that the positive trust-performance effect is more evident for firms with greater advisory needs and boards that can deliver high-quality advice. Finally, we find supporting evidence to our conjecture that the Chair–CEO trust increases firm value by improving the board advisory results, including value-adding decisions of R&D and merger and acquisition. JEL Classification: G32, G34, G41