Measuring management insulation from shareholder pressure

Daniel Ferreira, David Kershaw, Tom Kirchmaier () and Edmund-Philipp Schuster

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We propose a management insulation measure based on charter, bylaw, and corporate law provisions that make it difficult for shareholders to oust a firm’s management. Unlike the existing alternatives, our measure considers the interactions between different provisions. We illustrate the usefulness of our measure with an application to the banking industry. We find that banks in which managers were more insulated from shareholders in 2003 were significantly less likely to be bailed out in 2008/09. These banks were also less likely to be targeted by activist shareholders, as proxied by 13D SEC filings. By contrast, popular alternative measures of insulation -- such as staggered boards and the Entrenchment Index -- fail to predict both bailouts and shareholder activism.

Keywords: corporate governance; bank bailouts (search for similar items in EconPapers)
JEL-codes: E6 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2016-02-05
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:66566

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