Managerial entrenchment and firm value: a dynamic perspective
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Authors
Chang, X
Zhang, HF
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.
Description
Keywords
Corporate Governance, Managerial Entrenchment, Long Difference Estimator, Reverse Causality, Panel VAR
Journal Title
Journal of Financial and Quantitative Analysis
Conference Name
Journal ISSN
1756-6916
1756-6916
1756-6916
Volume Title
50
Publisher
Cambridge University Press (CUP)
Publisher DOI
Sponsorship
Chang acknowledges financial support from Academic Research Fund Tier 1 provided by Ministry of Education (Singapore). Zhang acknowledges the financial supports for his PhD research from the University of Melbourne.