Excessive managerial entrenchment, corporate governance, and firm performance

Christelle Antounian, Mustafa A. Dah and Mostafa Harakeh

Research in International Business and Finance, 2021, vol. 56, issue C

Abstract: This paper investigates the differential impact of positive and negative excessive managerial entrenchment on the CEO turnover-performance sensitivity, CEO compensation, and firm performance. We measure the degree of managerial entrenchment using the E-index introduced by Bebchuk et al. (2009). Our findings suggest that an increase in excess CEO entrenchment reduces the likelihood of CEO turnover due to poor performance. We also show a positive association between excessive entrenchment and CEO compensation as managers gain more power and authority when they are entrenched. On the other hand, excess CEO entrenchment has an inverse correlation with firm performance and firm value. Overall, we propose that excessive managerial entrenchment has a converse impact on board monitoring and shareholders’ welfare.

Keywords: CEO entrenchment; Corporate governance; Turnover-performance sensitivity; Managerial compensation; Firm performance (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:56:y:2021:i:c:s0275531921000131

DOI: 10.1016/j.ribaf.2021.101392

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