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Managerial Entrenchment and Firm Value: A Dynamic Perspective

Year: 2015

Type: article

Abstract: We examine the impact of managerial entrenchment on firm value using a dynamic model with firm fixed effects. To estimate the model, we employ the long-difference technique, which is shown by our simulation to deliver the least biased estimates. Based on a large sample of U.S. companies, we document a significantly negative and causal effect of managerial entrenchment on firm value after taking into account omitted variables, reverse causality, and highly persistent endogenous variables. Additional analysis suggests that the causality running from managerial entrenchment to firm value is more pronounced than that for reverse causality.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109015000423

Authors: Xin Chang, Hong Feng Zhang

Institution: Nanyang Technological University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3124594889

FWCI: 19.14

Cites: 31

Cited by: 54

Related to: 10