A Game of Checks and Balances: When Celebrity Director Meets Celebrity CEO

Previous findings on the relationship between celebrity CEO and risk-taking present a double-edged sword effect. Synthesizing agency theory and resource dependence theory, we hypothesize that the relationship may depend on celebrity directors. Further, we hypothesize that CEO duality would allow further enhancement of the moderating effect of celebrity directors in the relationship between celebrity CEO and risk-taking. Conversely, we hypothesize that an increase in the number of independent directors will weaken the moderating effect of celebrity directors in the relationship between celebrity CEO and risk-taking. Based on the sample of S&P 1500 companies between 2010 to 2016, our empirical analysis shows that the relationship between celebrity CEO and risk-taking is contingent on celebrity directors. Moreover, the moderating effect of celebrity directors depends on CEO duality and board independence. We conclude with a discussion and implications for theory and research.