Download or read book Managerial Entrenchment and Performance of Firms written by Nejla Ould Daoud Ellili and published by . This book was released on 2006 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this article is to determine the relation between managerial ownership and the performance of firms as well as the impact of managerial entrenchment on the firms' financial policy.The analyses of regressions on 283 firms show that the relation between the managerial ownership and the performance of firms is non linear. It takes the shape of the alignment, then of the entrenchment, then again of the alignment, as the managerial ownership increases. The manager possessing a part of capital between 5.72% and 55.47% is more susceptible to be entrenched and he/she prefers a weak ratio of debt to escape both the shareholders' control and the market's pressures of performance.
Download or read book Firm Performance Entrenchment and Managerial Succession in Family Firms written by Patrick McColgan and published by . This book was released on 2005 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the role of the family status of a company's top officer in managerial replacement decisions for a sample of 683 UK companies over the period 1992 to 1998. We report evidence that family firms are characterised by higher levels of board control, and weak internal governance in the form of independent company board structures. Consistent with a managerial entrenchment hypothesis, we find evidence that family CEOs are less likely to be removed from their position following poor performance than non-family CEOs. This relationship occurs even after controlling for the ownership of the company's top executive, suggesting that family status conveys additional power to the company's top officer in excess of that implied by their shareholding alone. Stock prices react favourably when companies announce that departure of a family CEO, but only when these directors are replaced by a non-family successor. We also report evidence of increases in operating performance following the departure of a family CEO, which are not witnessed following non-family CEO departures amongst our sample companies. Finally, we also find growth in company sales and employment following family CEO departures in excess of that witnessed following non-family CEO departures, indicating an untapped potential that family CEOs were unable to exploit prior to their departure. Overall, our results appear consistent with a managerial entrenchment hypothesis of the family status of a company's CEO, whereby the cash flows that shareholders expect to receive following their replacement are in excess of those anticipated under the family CEO.
Download or read book Entrenchment and Changes in Performance Following CEO Turnover written by Cristian L. Dezso and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I investigate whether CEO turnovers - forced, as well as voluntary - are accompanied by changes in firm performance, and whether governance provisions associated with managerial entrenchment affect these changes. Using data on CEO turnovers in the 800 largest U.S. companies occurring over the period 1980-2000, I present evidence that firms with entrenched CEOs exhibit significantly poorer performance in the year prior to forced turnover, and experience significantly larger performance improvements during the three years following forced turnover. More importantly, I show that these larger performance improvements are the result of improved management rather than mean reversion. This evidence provides strong support for the hypothesis that entrenchment hampers firm performance by protecting inferior CEOs.
Download or read book Management Entrenchment Reputation and Ownership written by I. J. Alexander Dyck and published by . This book was released on 1997 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper furthers understanding of agency costs by simultaneously examining management entrenchment and the potential disciplining force of the managerial labor market. I show that the labor market's ability to constrain rent seeking activities depends upon the precision of measures of management ability provided by current firm performance. The paper emphasizes how noise in the economic environment adds to imprecision and provides a shield for entrenchment activities, managers hiding their entrenchment behind the noise. Applying the model, I suggest that the identity of the owners of a firm affects the noise in the economic environment. The crux of the argument is that the labor market has a more difficult time discerning the objectives conveyed to managers in state-owned firms than in private-sector firms. Optimally, the labor market places a lower weight on current firm performance relative to previous signals of management ability in state-owned firms, thus encouraging more entrenchment activity. The paper suggests mechanisms to improve the efficiency of the labor market and helps rationalize differences in the restrictions placed on management discretion between state owned and private-sector firms.
Download or read book Managerial Entrenchment written by Nejla Ould Daoud Ellili and published by . This book was released on 2006 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this article is to measure the degree of managerial entrenchment and to study its impact on the performance of the firm. The modeling of the entrenchment's degree is based both on the personal characteristics of the manager and on the ownership structure of the firm. According to our empirical studies carried on 815 firms during the period 2001-2004, the entrenchment's degree depends significantly on the age and the tenure of the manager as well as the relative power of the managerial ownership.Moreover, the relation between the managerial entrenchment and the performance of the firm isn't linear. It takes the form of a harmful entrenchment then of a beneficial one as the entrenchment's degree increases. This shows that the managerial entrenchment isn't always harmful to shareholders wealth. Empirically, by exceeding a certain critical level (0.81), the managerial entrenchment becomes beneficial to the shareholders.
Download or read book Corporate Governance and Firm Performance written by Jonathan Karpoff and published by Blackwell Publishing. This book was released on 2000-11-09 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many studies indicate that a company's stock price decreases when the company adds restrictions regarding corporate governance to its charter or bylaws. The authors of this monograph analyzed the effect of 20 different governance provisions and report that companies with the fewest restrictive provisions in their industries have the best industry-adjusted performance.
Download or read book Poison Pills Managerial Entrenchment and Long run Firm Performance written by Edward T. Lin and published by . This book was released on 1995 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Entrenchment Managerial Shirking and Investment written by Keyang Daniel Yang and published by . This book was released on 2018 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effects of entrenchment on corporate investment and firm performance. To achieve identification, we use a novel measure of entrenchment and an instrumental variable based on firms' IPO cohort. We find that entrenchment reduces capital expenditures, R&D, and productivity, weakens a firm's competitiveness in the product market, and diminishes firm value. These findings are consistent with the shirking hypothesis that entrenchment enables managers to slack off and dodge responsibilities of overseeing investment projects.
Download or read book Political Power and Corporate Control written by Peter A. Gourevitch and published by Princeton University Press. This book was released on 2010-06-20 with total page 365 pages. Available in PDF, EPUB and Kindle. Book excerpt: Why does corporate governance--front page news with the collapse of Enron, WorldCom, and Parmalat--vary so dramatically around the world? This book explains how politics shapes corporate governance--how managers, shareholders, and workers jockey for advantage in setting the rules by which companies are run, and for whom they are run. It combines a clear theoretical model on this political interaction, with statistical evidence from thirty-nine countries of Europe, Asia, Africa, and North and South America and detailed narratives of country cases. This book differs sharply from most treatments by explaining differences in minority shareholder protections and ownership concentration among countries in terms of the interaction of economic preferences and political institutions. It explores in particular the crucial role of pension plans and financial intermediaries in shaping political preferences for different rules of corporate governance. The countries examined sort into two distinct groups: diffuse shareholding by external investors who pick a board that monitors the managers, and concentrated blockholding by insiders who monitor managers directly. Examining the political coalitions that form among or across management, owners, and workers, the authors find that certain coalitions encourage policies that promote diffuse shareholding, while other coalitions yield blockholding-oriented policies. Political institutions influence the probability of one coalition defeating another.
Download or read book Antitakeover Provisions Managerial Entrenchment and Firm Innovation written by Atreya Chakraborty and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the relation between antitakeover provisions (i.e. managerial entrenchment) and firm performance in innovation. Empirical results indicate that an increase in antitakeover provisions is negatively related to number of patents and number of citations to patents. Thus managers who are protected from takeover market perform worse on innovation. However, the negative relation between antitakeover provisions and firm innovation holds only for low-tech firms. For high-tech firms, this relation is not statistically significant. One possible explanation is that high-tech firms have to innovate continuously to survive in the long run. The competitive pressure to innovate or perish dissipates the negative effect of managerial entrenchment on firm innovation. Overall, our results support the agency based explanation of the relation between antitakeover provisions and firm performance in innovation.
Download or read book Management Retention Following Poor Performance written by Carolyn Carroll and published by . This book was released on 2002 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Acting in shareholders' best interests, the board of directors should remove top management when a firm performs poorly. However, empirical evidence indicates that sometimes boards replace top management and sometimes they do not. When top management is not replaced following poor performance, does this represent a failure of boards of directors and the market or is management so entrenched that it is not cost effective to remove management? That is, if the benefits of replacing management exceed the costs and yet the board does not replace top management then the board has failed in its fiduciary responsibility to act in shareholders' best interests. On the other hand, if the cost of replacing management exceeds the benefits, then boards are behaving in shareholders' best interests by not replacing management. Management is so entrenched that it is not cost effective to remove them. In this study, we examine a group of firms that performs poorly but boards do not replace management. Our measure of poor performance is white knights who lost money when acquiring a target firm and have q-ratios less than one. For these firms, proxies for the costs of replacing management are compared to proxies for the benefits of retaining management. We find that the market works, that the retention of a poorly performing CEO does not represent a failure of the boards, but rather the costs of replacing a poorly performing manager are greater than the benefits. Poorly performing management is so entrenched that it is not cost effective to replace them. We also find that if the share price falls too drastically, the probability of replacing management increases. A proxy battle indicating serious opposition to management also increase the probability of replacement even if the proxy battle is unsuccessful. Boards also tend to replace managers with no prior bidding experience who lose big when acquiring a target company. It is also less costly to replace managers who are close to retirement age. And the more control a CEO has over the company as evidenced by holding two job titles, the less likely the board is to replace him/her.
Download or read book Is Managerial Entrenchment Always Bad and Corporate Social Responsibility Always Good A Cross National Examination of Their Combined Influence on Shareholder Value written by Jordi Surroca and published by . This book was released on 2020 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research summary: Building on the comparative capitalism's notion of institutional complementarities, we examine whether firms' simultaneous adoption of managerial entrenchment provisions (MEPs) and corporate social responsibility (CSR) activities reinforces or undercuts one another in influencing firm financial performance. We propose that the financial impact of such configurations is contingent on the country's institutional setting. In Liberal Market Economies (LMEs), where firms face strong pressures to achieve short-term goals, the combination of MEPs and CSR creates shareholder value, particularly when firms engage in internally-oriented CSR projects. Conversely, in Coordinated Market Economies (CMEs), where institutions already curb short-term demands, the combined adoption of MEPs and CSR initiatives destroys shareholder value, particularly when this CSR is external. Overall, our study enhances understanding about the institutional complementarity between corporate governance and CSR.Managerial summary: This study examines how two organizational practices, managerial entrenchment provisions (MEPs) and corporate social responsibility (CSR), combine between them to improve or reduce firms' financial success. Our analysis demonstrates that institutional framework has a strong influence on their combined effect. When the institutional context supports solutions to coordination problems among economic agents through market-based arrangements, MEPs allow the implementation of strategies directed to promote long-term investments and relationships. In this case, MEPs when paired with CSR allow generating intangibles that contribute to create shareholder value. Contrarily, in frameworks with coordination mechanisms based on non-market arrangements, the joint adoption of MEPs and CSR destroys value by increasing the power of managers and blockholders to extract rents at the expense of firms' minority shareholders.
Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Download or read book Managerial Entrenchment and the Value of Dividends written by Woo-Jong Lee and published by . This book was released on 2014 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effects of takeover defenses on the value implication of dividends. Using the framework of Fama and French (1998), the paper shows that dividends paid by managers with strong managerial power resulting from takeover protection measures are more valued in the stock market. The results are consistent with the hypothesis of the agency costs of free cash flow built on by Jensen (1986) in the sense that dividends are important to determine firm value by reducing the free cash flow that would otherwise be deployed for private benefits by entrenched managers. This paper also examines whether the incremental value effect of dividends in entrenched firms is attributable to a numerator effect (changes in the future cash flow) or a denominator effect (changes in the discount rate). The empirical results show that the dividend payout of such firms is more positively related to future performance and more negatively related to information risk, which supports both numerator and denominator effects.
Download or read book Agency firm growth and managerial turnover written by Ronald W. Anderson and published by . This book was released on 2012 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Management Entrenchment Compensation and Performance written by Lynn Kin-fan Pi and published by . This book was released on 1992 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Report of the Committee on the Financial Aspects of Corporate Governance written by Committee on the Financial Aspects of Corporate Governance and published by . This book was released on 1992 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt:
