Entrenchment, governance, and the stock price reaction to sudden executive deaths

Jesus M. Salas

Journal of Banking & Finance, 2010, vol. 34, issue 3, 656-666

Abstract: To study managerial entrenchment, I use the stock price reaction to unexpected senior executive deaths. If a highly effective manager dies unexpectedly, the stock price reaction should be negative. If, however, death removes an entrenched manager when the board would or could not, the stock price reaction should be positive. While, individually, age and tenure only weakly correlate with the stock price reaction to a sudden death, the reaction is strongly positive (6.8%) if: (1) the executive's tenure exceeds 10 years, and (2) abnormal stock returns over the last three years are negative.

Keywords: Entrenchment; Corporate; governance; Firm; value; Takeovers (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (44)

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