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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.

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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

Volume Title

50

Publisher

Cambridge University Press (CUP)
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.